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French Pension Protests Draw Nearly A Million Marchers For Third Time In A Month

October 3, 2010

PARIS — Hundreds of thousands of protesters young and old demonstrated in France on Saturday, waving union flags and pressing conservative President Nicolas Sarkozy to drop plans to raise the retirement age from 60 to 62. It was the third day of protests in a month. Unions tried a new tactic, scheduling the protest for a Saturday instead of a weekday to draw families, youths and private-sector employees who don’t show up during the workweek. Pockets of students marched among the unions, and some parents carried children on their shoulders. France – one of many indebted European countries trying to scale back spending – says its money-losing pension system will collapse without reform. The government casts the plan as the only responsible course of action and insists people need to work longer because they are living longer. French unions, however, see retirement at 60 as a firmly entrenched right in a country attached to generous state benefits. Michelle Notte, a 68-year-old retiree, marched with her 9-year-old grandson in Paris. “I stand for my children, my grandchildren. It is for them that I demonstrate,” she said, adding that in retirement it’s “a joy to have free time, to take care of one’s grandchildren, to take care of others.” Police put nationwide turnout at 899,000, down 10 percent from protests Sept. 23. But unions said the movement was going strong: The CFDT union said 2.9 million protested, on par with last time. “There are more and more people who are against this injustice and want to send a strong message to the government – this is the last opportunity to change this draft reform and to make it more fair,’” said CFDT head Francois Chereque. Paris protesters marched past the site of the former Bastille prison, the famous revolutionary site. Several young protesters danced atop a van and led a call-and-response: “Retirement! At age 60!” “Young people are sick of seeing social benefits disappear,” said Thomas Roller, an 18-year-old high school student who marched in Paris. “France is becoming a country where it’s ‘every man for himself,’ and we don’t want that.” Organizers have counted on youth turnout to convince the government that even people who don’t generally think about old age are worried. But the spokesman of Sarkozy’s UMP party, Frederic Lefebvre, told France-Info radio that there wasn’t any significant youth participation and said the movement was on the decline. Two protests in September each drew around a million people throughout the country, according to the government, though unions gave much higher figures, up to 3 million. Those demonstrations were accompanied by broad strikes that hobbled train and commuter traffic, unlike Saturday, when there were few disruptions to public services. Dockers have been blocking the port in the southern city of Marseille, however, and 39 ships carrying oil, chemicals and other products were awaiting entry. France is among many European governments looking to cut costs and chip away at some cherished but costly benefits that underpin the good life on the continent. A euro110 billion ($140 billion) bailout for Greece has added to the sense of urgency this year. Conservative French lawmakers have already pushed the pension reform through its first legislative hurdle in the lower house of parliament. The Senate takes the measure up Tuesday, and protesters are planning to gather there too as debate gets under way. Another national day of protests is planned Oct. 12. The French government has expressed willingness to alter some language in the bill, but union leaders say their offers aren’t enough. The reform’s aim is make the money-draining pension system break even by 2018. Though the minimum retirement age would be 62, people would have to wait until age 67 if they want full pension benefits, up from age 65 today. France’s retirement age will still be lower than in comparable countries. Germany is set to raise its retirement age over the coming years from 65 to 67 to offset a shrinking, aging population, and the United States is gradually doing the same. ___ Associated Press writers Angela Doland, Nicolas Garriga and Paolo Santalucia in Paris contributed to this report.

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Beverly Blair Harzog: Top 5 Credit Card Books to Download on Your Kindle

September 29, 2010

The interest in eBooks is on the rise. And why not? If you love to read, reading a book on Kindle is a great way to indulge your passion while spending less money than you would at the bookstore. Reading books on Kindle also fits in with our on-the-go lifestyles. Whether you’re on a business trip or sitting in a carpool lane, you can pick out a book and be reading within minutes. There are some great books about credit cards that you can read on Kindle . Take a look at my top five picks: 1. Reduce Debt, Reduce Stress: Real Life Solutions for Solving Your Credit Crisis by Gerri Detweiler, Nancy Castleman, and Marc Eisenson (Good Advice Press, 2010; Kindle edition, $9.99). Are you stressed about your credit card debt? Unfortunately, many people find themselves in this situation nowadays. The economy may be technically recovering, but many folks are still trying to come back from financial losses suffered during the recession. This book just came out last month and the timing couldn’t be better. In this book, you get solid advice about topics such as how to get out of debt, how to spot debt-reduction scams and how to avoid bankruptcy mistakes. And the authors’ “debt triage” strategy is a must-read for those feeling overwhelmed with debt. 2. Your Credit Score, Your Money & What’s at Stake: How to Improve the 3-Digit Number that Shapes Your Financial Future by Liz Pulliam Weston (FT Press, 2009; Kindle version $9.99) This book was originally written in 2007 and it has now been updated to include advice on how to survive in our “post-economic crisis” world. This book is for anyone who wants to understand what makes up their credit score. In today’s economy, your credit score is more important than ever, so now’s the time to get a handle on it. Credit scores always seem a little mysterious, especially since there’s more than one scoring system out there. But this book is written in a straight-forward style that makes this complex topic easy to understand. Another helpful read by Weston that’s inexpensive ($1.59!), is How to Get the Best of Your Credit Cards (FT Press, 2010). It’s cheap because it’s just an excerpt from Easy Money: How to Simplify Your Finances and Get What You Want Out of Life (also a good read about personal finance, in general). Still, if you want to learn more about credit cards, this is a great way to get a lot of information in a small dose. 3. How You Can Profit from Credit Cards: Using Credit to Improve Your Financial Life and Bottom Line by Curtis E. Arnold (FT Press, 2008; Kindle edition, $9.99) This stellar book, written by CardRatings.com founder and consumer advocate Curtis Arnold, is a useful guide for savvy credit card holders. If you pay off your credit card bills every month, you’re a candidate to profit from your credit cards. This book goes beyond the obvious advice — use rewards cards when possible! — and gives insider details on how to make real money from your cards. You’ll also get tips on how to decipher credit reports, understand your credit score, slash debt, and more. And especially helpful is the chapter about how to capitalize on future credit card trends. 4. Money 911: Your Most Pressing Money Questions by Jean Chatzky (Harper Paperbacks, 2009; Kindle version, $9.99) If you’re feeling pressure from your credit card debt, this is another good book with sound advice. It answers questions such as which credit cards to pay off first, whether you should consolidate your debts and if you need credit counseling. Once you get answers to your urgent questions, the book guides you into a look at money and your life. Here, Chatzky gives insight about overall money management. The goal is to get to a state of financial well-being so that skilled money management becomes a way of life. 5. The Skinny on Credit Cards: How to Master the Credit Card Game by Jim Randel (RAND publishing, 2009, $9.99) If you’re interested in increasing your credit card I.Q., this witty book is a great place to start. There really aren’t enough books out there that give you the no-nonsense facts about credit cards like this book does. Randel gives us a glimpse into the lives of “Billy and Beth,” a typical young couple who have gotten themselves into credit card debt. This book aims to educate you about the “game” of credit cards and it successfully hits the mark.

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Phil Bronstein: ‘Billboard Family’ Puts Itself — Kids and All — On Sale

September 28, 2010

It’s no surprise that we’ve come to this: there’s a family for sale on the Internet . No, these aren’t hostages held by Somali pirates or advertised on a Craigslist adult S&M posting. I’m talking about a middle American family that may have willingly, enthusiastically crossed the line between personal brand management and indentured servitude. Anyone with a digital footprint is selling themselves these days. But in the spooky wasteland where product placement meets slavery, you will find the Martins. Not to diss entrepreneurial spirit in a down economy. Patriarch Carl Martin told me today that “overall, this has been the best decision we have ever made.” The Martins call themselves “The Billboard Family,” with what ad industry site Adrants says is “an offering that allows advertisers to own the Martin’s lives.” Yikes. Dad Carl, mom Amy and kids Layne and Kaitlyn have turned themselves into human signage. With a social media upsell. I know they’re serious but it’s a pretty funny pitch on their website. “We are a REAL family of 4 (with one on the way) who wears YOUR COMPANY SHIRTS all day long, taking loads of photos and videos. We then promote your company online on Facebook, Twitter, Flickr, YouTube, and our Website, as well as to all of the many people who ask us why we are all wearing the same shirts.” Uh, because you’re from St. Louis? Carl says “most of the companies we have already reached out to are ones whose products we use.” Their “main demographic is family oriented companies, being that we are a real family.” Still, “we are happy to advertise for any companies that do not violate our terms and conditions.” They may be an actual family, but potential sponsors usually like organic reality, as in real doctors who prescribe Nexium in their practice, not people just selling their endorsement. But on their video, the likable Martins even show a sonogram snap of their unborn child. Getting a t-shirt on a fetus might be tough. I was just about to ask the marketing department here about inking a deal for the Martins to wear Chronicle t-shirts — you have to send them the shirts; like Google, they don’t make products. Then I wondered just how many people might actually notice what the family is wearing. No worries there. The Martins “travel and take vacations frequently” from their Missouri home to places like Chicago, Seattle, and Walt Disney World (where at might be hard to stand out among people wearing black socks and bermudas). “We have plans to travel much more in the near future.” Don’t we all? They also have 2,700 followers on Twitter and 200 Facebook fans. (Over 2,500,” Carl says, if you include friends on personal pages.) Not exactly the makings of a viral stampede. “Many of our followers help spread the word,” according to Carl. “The potential to reach a large audience is there.” The “Billboard Family” also has two competitors: I Wear Your Shirt (Carl: “They are not family-centric”) and Girl In Your Shirt (doesn’t sound very family-centric). In their “About Us” section they have more personal stats for each of them than the average big league ball player: eye color, favorite color, height, weight and shoe size. How else would you ever know that four-year-old Layne wants a Power Wheels Cadillac Escalade? Carl’s dream job is to be a “professional t-shirt wearer”, which makes sense given this particular value-added business proposition. Carl, who has a computer sciences degree, was “inspired” in this new enterprise “by his desire to make a respectable living.” Well, who these days can really afford to make fun of that? Also, he said to me he “really wanted to teach our kids about self-reliance and business..They’re very young but they have been very involved..They also love the attention.” The Martin site is thick with optimism, including nifty separate sections for them to publish all their “National Press, “Local Press”, and “Other Media Outlets.” They’re all empty. I wonder where my blog post will go. They also have Yelp-like social media page for clients who write “a review of our services.” Empty. Also a place for Flickr photos and YouTube videos. Zip. Except a short about the Martins. To be fair, they only launched a few days ago. But in the “Only 84 Days left for sale!” calendar, 30 of them are filled with “SOLD” signs, all for around $550 per, calculated by their graduated pricing formula throughout the year (Would you rather have four people wearing your brand on their tees or buy an iPad?). So far one advertiser — “Studio-R” — has bought the Martins for a day, according to the calendar. And they boast that their October through November “Non-Profit slots [are] filled” by a children’s literacy program, “Everybody WINS!” Maybe they do. Here I am writing about them. Besides, it’s a buyer’s market out there and who’s to say the Martins aren’t the next big thing in digital marketing services?

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Dem Polls Make Case For Middle Class Tax Cuts, Dems Unconvinced

September 15, 2010

Democrats in the Senate are considering allowing a vote on extending all of the Bush tax cuts in an effort to win Republican support to extend only the middle-class rates, leadership aides said on Wednesday. Multiple polling memos are circulating on the Hill in an effort to persuade skeptical Democrats facing close races that extending the cuts for the middle class, while allowing rates to rise on the wealthy, is a political winner. Democrats are concerned that by holding merely a vote on extending tax cuts for those making $250,000 or less, conservative Democrats and Republicans would say they opposed the extension because it would raise taxes during rough economic times. But by allowing a vote on Senate Minority Leader Mitch McConnell’s (R-Ky.) plan to extend all the tax cuts, moderate Republicans and Democrats would be given cover. They could tell constituents they voted to extend all of the tax cuts, but the effort failed. The only choice left was to extend the middle-class tax cuts or let them all expire. Two leadership aides HuffPost spoke to thought the plan had a less than 50 percent chance of winning Republicans over. It’s a difficult issue for Democrats and those who are running close races have urged the party not to take up the vote before the election. The fear is that Republicans will find a small-businessman — it only takes one — and sit him before a camera, fretting that tax hikes will make it harder for him to hire people. Even Senate Majority Leader Harry Reid, running a tight race in Nevada, avoided saying at his press briefing Tuesday that he supports allowing the tax cuts for the wealthy to expire, answering in a round-about way. “Do you support President Obama’s tax plan personally, and would you vote for increasing taxes on families making over $250,000 a year?” Reid was asked. “We’re going to have a procedure during this period of time,” Reid said. “I’ve worked with Senator McConnell to come up with something reasonable that we can move forward on these tax issues. And I’m happy to do that. We have — it appears, at this stage, we have two issues. One is taking care of the middle class and the other is taking care of the millionaires. It’s pretty easy to understand where I am on that.” The reporter followed up to ask what specifically he supported. “I support the $250,000. I’ve said so many times,” he said. By allowing a vote on all of the tax cuts, Democrats hope to cut through the reluctance to raise taxes on the wealthy. Democratic consultants argue that Republicans who vote against extending the tax cuts could be successfully accused of “holding the middle class hostage” — a condemnation introduced Friday by President Obama at his press briefing. “The president strikes a strongly responsive chord with the public when he says that securing the middle-class tax cuts should not be held hostage to partisan wrangling about what to do with earners in the top income rate,” writes pollster Geoff Garin in a memo obtained by HuffPost that is circulating among Democrats on the Hill. “A decision by Republicans to block action on the middle-class tax cuts as a tactic to get their way on the tax cuts for those at the very top would be a untenable position for the GOP, especially given that voters already view it as a party that cares more about the wealthy than it does about the needs and struggles of the middle class.” Democrats are still divided over how to move forward and no consensus emerged after a party-wide meeting of senators over lunch Tuesday, though there was strong support for voting on extending the middle-class tax cuts before the election in November, aides said. A minority wanted a vote on extending the tax cuts for everyone making a million or less and others want no vote at all until after the election. “Everybody’s got a different pollster that’s telling them different things,” said one top Democratic aide. McConnell spokesman Don Stewart noted that the only tax-cut bill introduced so far is McConnell’s. Democrats, he said, are reluctant to put their name on any bill that raises taxes on anyone. “There is a growing number of Dems who just don’t want to deal with this,” Stewart said, citing Joe Manchin’s recent opposition to the president’s plan. Manchin is among several incumbents and challengers facing election in November to support extending all the tax cuts. On Tuesday night, House Speaker Nancy Pelosi (D-Calif.) made the case for moving forward with a vote on extending the middle-class cuts and allowing those for the wealthy to expire, backed up by polling presented by GQR’s Stan Greenberg. But on Wednesday morning, Majority Leader Steny Hoyer (D-Md.) said he was “prepared to discuss alternatives so we can move forward,” referring to extending all of the tax cuts. A second polling memo, circulating on the Hill in conjunction with the White House push, cites internal polling to make the case that extending the middle-class tax cuts is the right move politically. “The president’s recent proposal to extend tax cuts for the middle class, while letting the Bush tax cuts expire for the wealthy, is a smart political move for a number of reasons: 1) it enjoys rising public support; 2) it protects against the loss of swing independents; 3) it allows Democrats to drive a contrast with the GOP; and 4) it allows Democrats to address voters’ overlapping economic concerns,” offers the memo, which was obtained by HuffPost and written by John Anzalone and Mark Keida of Anzalone Liszt Research. “Recent internal polling conducted by GQR shows independents favoring the Democratic position on taxes by a 53% to 38% margin. Recent battleground polling conducted by Anzalone Liszt Research shows 40% to 50% of voters siding with the president’s position, compared to about one-third for the GOP position,” offers the memo, arguing that “the president’s plan helps protect against the exodus of swing independents to the Republican Party this cycle.” The Anzalone researchers find solid support for the plan to extend the middle-class tax cuts: “A majority (56%) opposes extending tax cuts for the top 2% of Americans (36% support this) according to a recent CBS poll. This includes a plurality of Republicans (48% to 46%) who believe we should let tax cuts expire for the rich. When asked specifically about the plan to extend tax cuts for the middle class, pluralities support the president’s plan. The most recent USA Today/Gallup poll from late August finds 44% support the president’s plan, compared to 37% who want to extend all taxes and 15% who want to let all taxes expire. This compares to older polls showing a deficit.” Garin cites polling showing that when the tax cuts are described in terms of priorities — extending the tax cuts versus investing in jobs or reducing the deficit — support for letting them expire at 60 percent and above among all voters, and higher among independents and Democrats. (Even 55% of Republicans support letting tax cuts for the wealthy expire in order to invest the money in incentives for business hiring.) When the tax cuts are not viewed through the prism of competing priorities, however, extending them becomes more popular. Fifty-three percent of all voters supported extending all the Bush tax cuts for two years, when asked the question in isolation. “Whatever disagreements there might be about the top income rate, Americans want the middle-class tax cuts made permanent. President Obama’s argument that we should get that job done now is politically and substantively compelling, and it gives Democrats a chance to play offense rather than defense. As John Boehner apparently has recognized, holding the middle-class tax cuts hostage to tax cuts for those at the top is a position the Republicans simply cannot sustain for long,” writes Garin. If everything collapses and nothing gets done, leadership aides in both parties think 2011 may see a debate on comprehensive tax reform, as the deficit commission recommendations, estate tax expiration, Bush tax cuts, alternative minimum tax and a variety of corporate tax and investment credits will all need to be dealt with. (Unless Congress rams it all through during the lame-duck session.) White House talking points, which were passed on to HuffPost, echo the strategy of painting Republicans, and McConnell in particular, as favoring the wealthy at the expense of the deficit. Talking Points: Republicans Aren¹t Serious About the Deficit · Today¹s Washington Post provides further evidence that the Republican Party, after turning a record surplus under President Clinton into record deficits, still cannot be trusted to come up with a serious solution to control spending and reduce the nation¹s deficit. Instead, the only thing they’re willing to offer are the same failed economic policies that created the mess we’re in. · Outlining Senate Minority Leader Mitch McConnell¹s tax plan, the paper finds that his call to permanently extend the Bush tax cuts for America¹s millionaires and billionaires would nearly double the projected deficit by adding $4 trillion to it over the next decade. And they’re pretending that they would pay for it through a projected spending freeze, that fails to mention what they would freeze or cut, and that would only save $300 billion over that same period of time. · Senator McConnell’s apparent solution to our economic challenges is to go back to the same economic policies that created the mess that has weakened the economy and left middle class families hurting: tax cuts for millionaires and billionaires who aren’t asking for one. But during these challenging economic times, we simply can’t afford to borrow another $700 billion over the next decade to give an average tax cut of $100,000 to Americans making over $1 million per year. · Looking at a plan similar to Senator McConnell’s, the nonpartisan CBO found that it would force the American people to borrow an additional $3.9 trillion over the next decade, while increasing payments on the national debt by $950 billion. Those numbers have a projected deficit impact that’s four times greater than health care reform and the stimulus package combined ­ two proposals the Republican Party fought strongly against because of the supposed long-term damage they would cause to the deficit. · Unfortunately, this lack of seriousness shouldn’t come as a surprise to anyone. If the Republican Party has been clear about anything over the past 19 months, it’s that they’re far more interested in political games and standing up for big special interests than offering serious solutions to our nation’s problems. · Despite all of their bluster about deficits and out of control spending, it’s clear that the Republican Party hasn’t changed and still has no viable plan to fix either problem. Senator McConnell’s tax plan would only increase our nation’s deficit and do absolutely nothing to grow our economy, put people back to work and strengthen America¹s middle class. Instead, it would take us back to the same exact failed economic policies that created the mess we¹re in: cut taxes for millionaires and billionaires; cut rules for the special interests and big corporations and cut the middle class loose to fend for itself. · Are these really the people we want to put in charge of our economy?

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Trapped Chile Miners Get More Than 1,000 Job Offers

September 14, 2010

SANTIAGO, Chile — Chile’s 33 trapped miners have something good to think about: their next jobs. Bulldozer driver, mechanic, electrician. And here’s a couple they might find particularly useful: “risk reduction specialist” and “escape-tunnel driller.” Two dozen companies with operations in Chile have made more than 1,000 job offers to the trapped miners and their 317 sidelined co-workers at a job fair this week. Even if they choose to go back to mining, the work won’t necessarily be underground and it will almost certainly be with a company with a better safety record than their struggling current employer. The 33 miners have been trapped for 40 days in harrowing, sweltering conditions since an Aug. 5 collapse. No miners in history have been trapped so long, and it still could be months before a hole large enough to get them out is completed. They are getting food, medicine, communication and other essentials through narrower holes dug by rescuers, but their anxiety has become evident, with more questions asked each time they hear the drilling stop. Their relatives wait anxiously for the miners, many in tents at the mine itself, but in many ways life goes on without them. One of them, Ariel Ticona, became a father for the first time Tuesday. The San Esteban mining company, which owns the mine, has pursued bankruptcy protection since the collapse and has claimed it can’t afford to pay the trapped miners, even though they’ll have to work their way out by clearing rubble around the clock below the escape tunnels. The San Jose miners have been offered 1,188 jobs as of Tuesday, many of them posted on a government labor ministry web site. Mining industry companies have interviewed some 200 of the miners who are not trapped at a hotel in the regional capital of Copiapo, and say they have no trouble waiting for the trapped miners to be rescued before they interview them as well. “The 33 won’t be without a job,” vowed Sara Morales, a deputy human resources director for Terra Services, a Chilean drilling company. She told The Associated Press on Tuesday that she had received resumes from 80 miners and will offer 20 of them jobs. There will be no deadline for the trapped miners to take advantage of this “relocation program,” said Jose Tomas Letelier, a vice-president at Canadian gold mining company Kinross. None of the trapped miners should have to venture back into marginal mines like San Jose that struggle to meet Chile’s modern safety standards. Many of these job offers come from some of the world’s most advanced mining companies – major international players making huge investments in Chile. The companies are prepared to have the miners work as truck or bulldozer drivers, heavy equipment operators, electricians, mechanics, and supervisors in various jobs up on the surface. Kinross alone is offering 46 positions, including risk reduction specialist. “As the name suggests, it’s to prevent risks in mining, which is a very risky activity … it’s a very important role,” Letelier said. Even without the government-organized job offers, the miners shouldn’t lack for work in the industry. Chile’s mining sector is booming, with $50 billion in new investment expected in the next five years, making skilled mining workers increasingly hard to find. “It’s already difficult today to find certain kinds of operators,” Letelier said. Some of the jobs being offered to the miners seem risky – like the four “explosives handler” positions the San Geronimo mining company seeks to fill. Some of the spouses of the trapped men have warned them to give up mining or else. Lila Ramirez has said her marriage to 63-year-old Mario Gomez will be over if he returns to the mines. And Carola Narvaez, whose husband, Raul Bustos, is stuck underground, said a few days after the miners were found alive that “in my heart, I don’t want him to ever return to the mines.” Asked if she thought her husband would be willing to give up the relatively good wages a man can make in mining – and if she would have the power to convince him otherwise – she flashed a bittersweet smile and shrugged. “Every man has to work,” she said. Miners who narrowly escaped the San Jose collapse have said they chose to work at the marginal gold and copper mine precisely because its added risk meant the San Esteban mining company had to pay slightly better wages. The San Jose mine lacks safety measures such as an escape tunnel, and just weeks before the collapse, falling rock cost one worker his leg. Dozens of engineers are now working day and night to construct and maintain the three giant drills that the government has brought in to reach the miners. Two drills have been put into service, but one of them was out of commission for six days after breaking when it hit an iron bar. That drill, known as the “Plan B” drill, was working again Tuesday after engineers used magnets to pull out a large shattered piece and replacement parts were flown in from the United States. A massive “Plan C” drill is expected to be operational by Sept. 20. Once the drills break through to the bottom reaches of the mine, they’ll have to do it all over again, widening the tunnels just enough to be able to pull the men out one by one. Experts believe it will be early November before the last miner is rescued. Worry gave way to joy for Ticona on Tuesday when his wife, Elizabeth Segovia, gave birth to their daughter by cesarean section. The couple had planned to name the girl Carolina, but Ticona had a change of heart by the time he and a relative had a recorded video chat through a fiber-optic cable connection. “Tell her to change the name of our daughter … and give her a long-distance kiss!” Ticona said as the other miners shouted, “We’re going to name her Esperanza!” – the Spanish word for hope. Segovia told Chile’s Canal 13 network that she had exactly the same thought. ___ Associated Press Writers Federico Quilodran in Santiago, Aliosha Marquez in Copiapo, Brad Brooks at the San Jose mine and Frank Bajak in Bogota contributed to this story.

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Bailed-Out Banks Finance ‘Legalized Loan Shark’ Payday Lenders, Says New Report

September 14, 2010

Big banks that received TARP bailout money are funding payday lenders — companies Senator Dick Durbin (D – Ill.) termed ” bottom feeders ” — and which charge high interest rates and fees for short-term loans, according to a report released Tuesday. The banks, which include Wells Fargo, Bank of America and JP Morgan, currently provide roughly $1.5 billion in credit lines to publicly-held payday loan companies and between $2.5 to $3 billion to the larger payday loan industry, says the report, which was issued jointly by community group network National People’s Action and non-partisan watchdog Public Accountability Initiative. The payday lenders, including Advance America, Cash America and ACE Cash Express, which allow customers to borrow against future paychecks, and which, according to the report, charge an average interest rate of 455 percent on top of fees of $15-18 per $100 loaned, often depend on the big banks’ financing for their business. “The very same banks that helped tank the economy and then needed hundreds of billions of dollars in taxpayer-funded bailouts are now aiding the bottom-feeders of the financial industry, as they seek–the payday lenders–to strip even more wealth away from everyday Americans,” NPA executive director George Goehl, who also called payday lending “legalized loan sharking,” said in a telephone press conference. “If Al Capone was alive today you might even get a better loan from him.” (Goehl is also a HuffPost blogger) The report, called “The Predators’ Creditors,” which features a picture of three sharks on the cover, says that some banks abstain from business with payday lenders because of what Advance America itself calls “reputational risks.” The report also notes, though, that some of these payday lenders have ties to Wall Street. For example, the board of Advance America includes former executives from Bank of America, Morgan Stanley and Credit Suisse. PAI co-director Kevin Connor, who co-authored the report, said in the press conference that big banks are attracted to the payday loan industry because “Americans were losing their jobs and homes in record numbers but they still had their family treasure to borrow against” Connor also noted that the big banks themselves pay close to zero interest when they borrow from the Fed, a stark contrast to the high interest rates paid by consumers. NPA and PAI are calling for an end to these credit lines from banks. Goehl said a protest campaign will launch today in Ohio and continue in Iowa, Kansas, Missouri and Illinois through next week, culminating in a meeting of the organizers in Chicago. “This report is really the beginning, not the end,” he said.

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Cuba To Cut 500,000 Government Workers, Reduce Restrictions On Private Enterprise

September 13, 2010

HAVANA — Cuba announced Monday it will cast off at least half a million state workers by early next year and reduce restrictions on private enterprise to help them find new jobs – the most dramatic step yet in President Raul Castro’s push to radically remake employment on the communist-run island. Castro suggested during a nationally televised address on Easter Sunday that as many as 1 million Cuban workers – about one in five – may be redundant. But the government had not previously laid out specific plans to slash its work force, and the speed and scope of the coming cutbacks were astounding. Cuba’s official work force is 5.1 million – meaning nearly 10 percent of all employees could soon be out of a government job. Workers caught off guard by the announcement said they worried whether the tiny private sector could support so many new jobs, a sentiment echoed by some analysts. “For me the problem is the salaries, that’s the root of it,” said Alberto Fuentes, a 47-year-old government worker. “If they fire all of these people, how can they all become self-employed?” The layoffs will start immediately and continue through April 2011, according to a statement from the nearly 3 million-strong Cuban Workers Confederation, which is affiliated with the Communist Party and the only labor union allowed by the government. Eventually the state will only employ people in “indispensable” areas such as farming, construction, industry, law enforcement and education. To soften the blow, the statement – which appeared in state newspapers and was read on television and radio – said the government would increase private-sector job opportunities, including allowing more Cubans to become self-employed. They also will be able to form cooperatives run by employees rather than government administrators, and increasingly lease state land, businesses and infrastructure. The announcement was short on details of how such a major shift could be achieved, but its intent appeared to deal a body-blow to the decades-old social safety net upon which the island’s egalitarian society is built. Castro has long complained that Cubans expect too much from the government, which pays average monthly salaries of just $20 but also provides free education and health care and heavily subsidizes housing, transportation and basic food. Because unemployment is anathema in a communist society, state businesses have been forced to carry many people who do almost nothing. “Our state cannot and should not continue supporting businesses, production entities and services with inflated payrolls, and losses that hurt our economy are ultimately counterproductive, creating bad habits and distorting worker conduct,” the union said. Even before the announcement, interviews with scores of workers across several government sectors showed that layoffs were already under way – with many complaining the state was not doing enough to find them new jobs. Larry Birns, director of the Washington-based Council on Hemispheric Affairs, said a series of small changes – such as allowing the unrestricted sale of cell phones, privatizing some state-run barbershops, licensing more private taxis and distributing fallow land to private farmers – have moved Cuba toward economic reform since July 2006, when serious intestinal illness nearly killed Fidel Castro and forced him to cede power to Raul. While none of those were blockbusters, Birns said, Monday’s revelation has the potential to be one. “Cuba is rapidly becoming like any other country,” he said. “It is not going back. These are big changes.” Some Cubans also said they supported the changes, hoping that even a small dose of private enterprise would go a long way in a country where state mismanagement has led to frequent shortages of everything from potatoes to toothpaste. “There are many things that are deficient now including services, which, of course, the private sector will improve on,” said Moraima Santos, a 65-year-old employee in the Office of the City of Havana Historian. “I completely support the government giving private employment licenses. That’s going to benefit a lot of people.” Others were skeptical. Arch Ritter, an expert on the Cuban economy at Carleton University in Ottawa, Canada, said the cutbacks rely too heavily on a work force unaccustomed to going into business for itself. “To imagine that the private sector is going to absorb so many people is a bit of a stretch,” he said. “It’s going to be a major problem for the country.” Building on his April remarks, Castro warned in August that layoffs would be coming and said Cuba would expand private enterprise on a small scale, increasing the number of jobs where Cubans could go into business for themselves. Monday’s announcement also said Cuba will overhaul its labor structure and salary systems to emphasize productivity so that workers are “paid according to results.” Castro has said repeatedly he is seeking to reform the pay system to hold workers accountable for production, but change has been slow in coming. Currently the state employs 95 percent of the official work force. Unemployment last year was 1.7 percent and hasn’t risen above 3 percent in eight years – but that ignores thousands of Cubans who aren’t looking for jobs because wages are so low. The labor overhaul comes less than a week after Fidel Castro caused a stir around the globe when he was quoted by visiting American magazine writer Jeffrey Goldberg as saying Cuba’s communist economy no longer works. Castro later said that while he was not misquoted, his words were misinterpreted – and that he meant to say capitalist reforms could never work in Cuba. Goldberg said Monday he was surprised by Fidel Castro’s claim, since he has made similar statements before. He said economic reforms such as the one announced Monday prove the Cuban government realizes the need for change. “Not only has he said things like this before, but the on-the-ground reality is that it is a truism that the Cuban model is not working, and that is why they are starting this large-scale experiment with privatization,” Goldberg told reporters. ___ Associated Press writer Andrea Rodriguez contributed to this report.

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Robert Auerbach: Malpractice at the Bernanke Federal Reserve

September 13, 2010

During September 2008 hysteria hit the financial markets and the economy dived. Hundreds of billions of Lehman Brothers’ liabilities dried up when it went bankrupt on September 16. A day later the Federal Reserve gave AIG an initial bailout of $85 billion. AIG was unable to pay its huge losses on insurance products that were exempt from insurance regulations. The following week the Fed announced that two large investment banks, Goldman Sachs and Morgan Stanley, would be made commercial banks allowing them readily available borrowing authority from the Fed’s “discount window.” Immediately after the recession took a dramatic dive in September 2008, the Bernanke Fed implemented a policy that continues to further damage the incentive for banks to lend to businesses. On October 6, 2008 the Fed’s Board of Governors, chaired by Ben Bernanke, announced it would begin paying interest on the reserve balances of the nation’s banks, major lenders to medium and small size businesses. You don’t need a Ph.D. economist to know that if you pay banks ¼ percent risk free interest to hold reserves that they can obtain at near zero interest, that would be an incentive to hold the reserves. The Fed pumped out huge amounts of money, with the base of the money supply more than doubling from August 2008 to August 2010, reaching $1.99 trillion. Guess who has over half of this money parked in cold storage? The banks have $1.085 trillion on reserves drawing interest, The Fed records show they were paid $2.18 billion interest on these reserves in 2009. A number of people spoke about the disincentive for bank lending embedded in this policy including Chairman Bernanke. I spoke against this policy in January 2009 at the National Press Club and at Chapman University Law School. Jim McTague, Washington Editor of Barrons , wrote in his February 2, 2009 column, “Where’s the Stimulus:” “Increasing the supply of credit might help pump up spending, too. University of Texas Professor Robert Auerbach an economist who studied under the late Milton Friedman, thinks he has the makings of a malpractice suit against Federal Reserve Chairman Ben Bernanke, as the Fed is holding a record number of reserves: $901 billion in January as opposed to $44 billion in September, when the Fed began paying interest on money commercial banks parked at the central bank. The banks prefer the sure rate of return they get by sitting in cash, not making loans. Fed, stop paying, he says.” Shortly after this article appeared Fed Chairman Bernanke explained: “Because banks should be unwilling to lend reserves at a rate lower than they can receive from the Fed, the interest rate the Fed pays on bank reserves should help to set a floor on the overnight interest rate.” (National Press Club, February 18, 2009) That was an admission that the Fed’s payment of interest on reserves did impair bank lending. Bernanke’s rationale for interest payments on reserves included preventing banks from lending at lower interest rates. That is illogical at a time when the Fed’s target interest rate for federal funds, the small market for interbank loans, was zero to a quarter of one percent. The banks would be unlikely to lend at negative rates of interest — paying people to take their money — even without the Fed paying the banks to hold reserves. The next month William T. Gavin, an excellent economist at the St. Louis Federal Reserve, wrote in its MarchApril 2009 publication: “first, for the individual bank, the risk-free rate of ¼ percent must be the bank’s perception of its best investment opportunity.” The Bernanke Fed’s policy was a repetition of what the Fed did in 1936 and 1937 which helped drive the country into a second depression. Why does Chairman Bernanke, who has studied the Great Depression of the 1930′s and has surely read the classic 1963 account of improper actions by the Fed on bank reserves described by Milton Friedman and Anna Schwartz, repeat the mistaken policy? As the economy pulled out of the deep recession in 1936 the Fed Board thought the U.S. banks had too much excess reserves, so they began to raise the reserves banks were required to hold. In three steps from August 1936 to May 1937 they doubled the reserve requirements for the large banks (13 percent to 26 percent of checkable deposits) and the country banks (7 percent to 14 percent of checkable deposits). Friedman and Schwartz ask: “why seek to immobilize reserves at that time?” The economy went back into a deep depression. The Bernanke Fed’s 2008 to 2010 policy also immobilizes the banking system’s reserves reducing the banks’ incentive to make loans. This is a bad policy even if the banks approve. The correct policy now should be to slowly reduce the interest paid on bank reserves to zero and simultaneously maintain a moderate increase in the money supply by slowly raising the short term market interest rate targeted by the Fed. Keeping the short term target interest rate at zero causes many problems, not the least of which is allowing banks to borrow at a zero interest rate and sit on their reserves so they can receive billions in interest from the taxpayers via the Fed. Business loans from banks are vital to the nations’ recovery.

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Robert Auerbach: Malpractice at the Bernanke Federal Reserve

September 13, 2010

During September 2008 hysteria hit the financial markets and the economy dived. Hundreds of billions of Lehman Brothers’ liabilities dried up when it went bankrupt on September 16. A day later the Federal Reserve gave AIG an initial bailout of $85 billion. AIG was unable to pay its huge losses on insurance products that were exempt from insurance regulations. The following week the Fed announced that two large investment banks, Goldman Sachs and Morgan Stanley, would be made commercial banks allowing them readily available borrowing authority from the Fed’s “discount window.” Immediately after the recession took a dramatic dive in September 2008, the Bernanke Fed implemented a policy that continues to further damage the incentive for banks to lend to businesses. On October 6, 2008 the Fed’s Board of Governors, chaired by Ben Bernanke, announced it would begin paying interest on the reserve balances of the nation’s banks, major lenders to medium and small size businesses. You don’t need a Ph.D. economist to know that if you pay banks ¼ percent risk free interest to hold reserves that they can obtain at near zero interest, that would be an incentive to hold the reserves. The Fed pumped out huge amounts of money, with the base of the money supply more than doubling from August 2008 to August 2010, reaching $1.99 trillion. Guess who has over half of this money parked in cold storage? The banks have $1.085 trillion on reserves drawing interest, The Fed records show they were paid $2.18 billion interest on these reserves in 2009. A number of people spoke about the disincentive for bank lending embedded in this policy including Chairman Bernanke. I spoke against this policy in January 2009 at the National Press Club and at Chapman University Law School. Jim McTague, Washington Editor of Barrons , wrote in his February 2, 2009 column, “Where’s the Stimulus:” “Increasing the supply of credit might help pump up spending, too. University of Texas Professor Robert Auerbach an economist who studied under the late Milton Friedman, thinks he has the makings of a malpractice suit against Federal Reserve Chairman Ben Bernanke, as the Fed is holding a record number of reserves: $901 billion in January as opposed to $44 billion in September, when the Fed began paying interest on money commercial banks parked at the central bank. The banks prefer the sure rate of return they get by sitting in cash, not making loans. Fed, stop paying, he says.” Shortly after this article appeared Fed Chairman Bernanke explained: “Because banks should be unwilling to lend reserves at a rate lower than they can receive from the Fed, the interest rate the Fed pays on bank reserves should help to set a floor on the overnight interest rate.” (National Press Club, February 18, 2009) That was an admission that the Fed’s payment of interest on reserves did impair bank lending. Bernanke’s rationale for interest payments on reserves included preventing banks from lending at lower interest rates. That is illogical at a time when the Fed’s target interest rate for federal funds, the small market for interbank loans, was zero to a quarter of one percent. The banks would be unlikely to lend at negative rates of interest — paying people to take their money — even without the Fed paying the banks to hold reserves. The next month William T. Gavin, an excellent economist at the St. Louis Federal Reserve, wrote in its MarchApril 2009 publication: “first, for the individual bank, the risk-free rate of ¼ percent must be the bank’s perception of its best investment opportunity.” The Bernanke Fed’s policy was a repetition of what the Fed did in 1936 and 1937 which helped drive the country into a second depression. Why does Chairman Bernanke, who has studied the Great Depression of the 1930′s and has surely read the classic 1963 account of improper actions by the Fed on bank reserves described by Milton Friedman and Anna Schwartz, repeat the mistaken policy? As the economy pulled out of the deep recession in 1936 the Fed Board thought the U.S. banks had too much excess reserves, so they began to raise the reserves banks were required to hold. In three steps from August 1936 to May 1937 they doubled the reserve requirements for the large banks (13 percent to 26 percent of checkable deposits) and the country banks (7 percent to 14 percent of checkable deposits). Friedman and Schwartz ask: “why seek to immobilize reserves at that time?” The economy went back into a deep depression. The Bernanke Fed’s 2008 to 2010 policy also immobilizes the banking system’s reserves reducing the banks’ incentive to make loans. This is a bad policy even if the banks approve. The correct policy now should be to slowly reduce the interest paid on bank reserves to zero and simultaneously maintain a moderate increase in the money supply by slowly raising the short term market interest rate targeted by the Fed. Keeping the short term target interest rate at zero causes many problems, not the least of which is allowing banks to borrow at a zero interest rate and sit on their reserves so they can receive billions in interest from the taxpayers via the Fed. Business loans from banks are vital to the nations’ recovery.

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Austan Goolsbee To Chair Council Of Economic Advisers, Replacing Christina Romer

September 9, 2010

Administration sources tell ABC News that at the start of his press conference Friday morning, President Obama will formally announced that he is appointing University of Chicago economist Austan Goolsbee to be chair of his Council of Economic Advisers. Goolsbee, 41, has already been confirmed by the Senate to serve as one of the three economists on the CEA; President Obama has the prerogative to appoint the chair. The former chair, Christina Romer, departed last week, returning to teach at the University of California at Berkeley. Goolsbee is also chief economist for the Presidential Economic Recovery Advisory Board.

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Obama Blasts Bush Tax Cuts, Calls Out John Boehner In Ohio Economic Speech

September 8, 2010

CLEVELAND — Politically weakened but refusing to bend, President Barack Obama insisted Wednesday that Bush-era tax cuts be cut off for the wealthiest Americans, joining battle with Republicans – and some fellow Democrats – just two months before bruising midterm elections. Singling out House GOP leader John Boehner in his home state, Obama delivered a searing attack on Republicans for advocating “the same philosophy that led to this mess in the first place: cut more taxes for millionaires and cut more rules for corporations.” Obama rolled out a trio of new plans to help spur job growth and invigorate the sluggish national economic recovery. They would expand and permanently extend a research and development tax credit that lapsed in 2009, allow businesses to write off 100 percent of their investments in equipment and plants through 2011 and pump $50 billion into highway, rail, airport and other infrastructure projects. The package was assembled by the president’s economic team after it became clear that the recovery was running out of steam. There was a political component, too: With Democrats in danger of losing control of the House in November, Obama is under heavy pressure to show voters that he and his party are ready to do more to get the economy moving and get millions of jobless Americans back to work. However, none of Wednesday’s proposals, nor Obama’s call for allowing tax rates to rise for the wealthiest Americans, seems likely to be acted on by Congress before the elections, reflecting the battering Obama and congressional Democrats have taken in public opinion polls. Obama made one of his strongest appeals yet to allow the tax cuts passed under President George W. Bush – in 2001 and 2003 – to expire at the end of the year on schedule, but just for individuals earning more than $200,000 annually or joint filers earning over $250,000. The changes would affect dividend and capital gains rates and various other tax benefits as well as income from wages and salaries. The president’s strategy – pushing for legislation to save some tax cuts but not all – carries its own risks. Since all the tax breaks would expire automatically at the end of the year if Congress failed to act, that could result in sweeping increases for taxpayers at every income level – a major blow to recovery hopes and a colossal dose of blame for voters to parcel out to lawmakers and the White House. Some influential Democrats, and Obama’s own former budget director, Peter Orszag, have suggested a compromise might be necessary – one to temporarily extend all the tax cuts, perhaps for a year or two – given the current election-year animosity between the two parties. But in his remarks in Cleveland, Obama strongly signaled he wasn’t about to sign off on any such deal. “Let me be clear to Mr. Boehner and everyone else. We should not hold middle class tax cuts hostage any longer,” the president said. The administration “is ready this week to give tax cuts to every American making $250,000 or less,” he said. It was a slight misstatement of his own position, since the $250,000 would apply to household income. The threshold for individuals would be $200,000 White House officials said Cleveland was picked as the speech site expressly because Boehner, who probably would become House speaker if Republicans take back control of the chamber in November, laid out his party’s economic agenda here in a fiery Aug. 24 speech. At that time, the Ohio Republican called for Obama to fire key economic advisers and to support an extension of all the Bush tax cuts. Boehner kept up the attack on Wednesday. “If the president is really serious about focusing on jobs, a good start would be taking the advice of his recently departed budget director and freezing all tax rates, coupled with cutting of federal spending to where it was before all the bailouts, government takeovers and `stimulus’ spending sprees,” he said after Obama spoke. Earlier, Boehner was even more specific on ABC’s “Good Morning America,” saying Congress should freeze all tax rates for two years and pare back federal spending to 2008 levels. The deep recession began in December 2007. White House press secretary Robert Gibbs noted that keeping the Bush tax cuts in effect just for two more years would represent a change from past calls by Boehner to keep them in place permanently. “My question for him is: Are they abandoning the permanent or are they going with the two-year plan? I’ve seen him saying permanent so many times that I tend to believe that,” Gibbs told reporters aboard Air Force One. “That’s his plan and I think that continues to be his plan.” Republicans, and some Democrats, argue that the fragile state of the economy makes this a poor time to raise taxes on anyone – and that increases could stifle wealthier people’s appetite for spending. Obama argued that the rich are more likely to save additional money than spend it. And he said the struggling U.S. economy can’t afford to spend $700 billion to keep lower tax rates in place for the nation’s highest earners. That $700 billion is what the nonpartisan congressional Joint Committee on Taxation estimates it would cost the Treasury to continue tax cuts for top earners over 10 years. What Obama wants to do would cost just over $3 trillion over the same period, the panel estimates. The debate over the Bush tax cuts is an unwelcome one for dozens of vulnerable Democratic incumbents just weeks before Election Day. Already, a handful of Democrats in conservative or swing districts, such as Reps. Gerry Connolly in the northern Virginia suburbs of Washington, D.C., and Bobby Bright in southeastern Alabama, have come out publicly for extending all the cuts – at least temporarily. Sen. Michael Bennet, D-Colo., engaged in a tight re-election battle, said he “would not support additional spending in a second stimulus package” and that any new initiatives such as Obama’s infrastructure package should be paid for with leftover funds in the $814 billion stimulus package passed last year. Still other embattled Democrats, wary of alienating middle-class voters, are siding with Obama. In central Ohio, for example, Rep. Mary Jo Kilroy has said the tax cuts for higher earners should be repealed but middle-income people should see no tax increases. Obama acknowledged recovery had slowed noticeably, with unemployment hovering just under 10 percent. “The middle class is still treading water, while those aspiring to reach the middle class are doing everything they can to keep from drowning,” he said. Polls have shown a steady slippage in Obama’s approval ratings and an accompanying rise in Republican prospects for winning House and Senate seats in November. That has chipped away at Obama’s leverage to get things done in Congress. Obama has sought to frame the election as a choice between continuing his policies or reinstating those pursued by Bush. He acknowledged in an interview with ABC after his speech that “if the election is a referendum on are people satisfied about the economy as it currently is, then we’re not going to do well, because I think everybody feels like this economy needs to better than it’s been doing.” The excerpt was aired Wednesday on ABC’s evening news. Fuller portions of the interview were airing Thursday morning on “Good Morning America.” ___ Tom Raum reported from Washington. Associated Press writers Stephen Ohlemacher and Erica Werner in Washington contributed to this report.

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Obama To Push For Research And Development Tax Credits

September 5, 2010

WASHINGTON — Seeking ways to spur economic growth ahead of the November elections, President Barack Obama will ask Congress to increase and permanently extend research and development tax credits for businesses, a White House official said Sunday. Obama will outline the $100 billion proposal during a speech on the economy Wednesday in Cleveland, the official said. The announcement is expected to be the first in a series of new measures Obama will propose this fall as the administration looks to jump-start an economy that the president himself has said isn’t growing fast enough. In addition to making the research credits permanent, Obama will also ask Congress to extend one of the credit options available to businesses from 14 to 17 percent, according to the official, who spoke on the condition of anonymity because the proposal has not been formally announced. Obama has proposed making the research and development tax credit permanent before, as part of the budget he submitted to Congress earlier this year. “That’s where U.S. competitiveness lies in high-technology industries,” Laura Tyson, a member of Obama’s Economic Recovery Advisory Board, said Sunday on “Face the Nation” on CBS. “I don’t think this is something that has … as immediate a job impact as, say, movement on the current tax credits for the unemployed or extending a payroll tax holiday of some sort. But I think it’s very important in terms of job creation over the longer term,” Tyson said. While the idea is popular in Congress, coming up with offsetting tax increases or spending cuts has been a stumbling block. Obama will ask lawmakers to close corporate tax breaks for multinational corporations and oil and gas companies. Congress has previously passed research tax credits on a temporary basis. The credits expired last year and a proposal for renewal is pending in the Senate. While research credits generally have bipartisan support, Washington’s contentious political atmosphere means the White House isn’t taking anything for granted. Officials have watched other proposals they deem necessary to economic growth, including a bill to extend credit and cut taxes for small businesses, languish on Capitol Hill. The proposal for research and development tax credits was first reported by The New York Times. Amid an uptick in the jobless rate to 9.6 percent, the president promised to announce a series of new measures on the economy. The package could include infrastructure bonds for municipalities and extensions for other tax breaks for businesses and individuals that expired at the end of 2009. The administration is also considering extending a law passed in March that exempts companies that hire unemployed workers from paying Social Security taxes on those workers through December. Sen. Chuck Schumer, D-N.Y., has proposed extending the exemption an additional six months. Obama is continuing to prod the Senate to pass the small business bill that calls for about $12 billion in tax breaks and a $30 billion fund to help unfreeze lending. Republicans have likened the bill to the unpopular bailout of the financial industry. And the president wants to make permanent the portion of George W. Bush’s tax cuts affecting the middle class. The House has already passed many of the provisions, but they have stalled in the Senate because Republicans and Democrats cannot agree on how to pay for them. AFL-CIO President Richard Trumka argued for job investment as a way of putting money in the pockets of middle-class Americans and others who need it. “We do need more credit for small- and mid-sized businesses so that they can start creating jobs,” Trumka said Sunday on CNN’s “State of the Union.” “All of that will help, but it may not be enough. Even the holiday on taxes may not be enough, the research and development tax credit may not be enough. We need to create demand.” ___ Associated Press writer Stephen Ohlemacher contributed to this report.

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Lindsey Graham Gets It Wrong On The Stimulus: Blames Legislation For U.S. Job Losses

September 5, 2010

A top issue on the Sunday morning talk shows was the Obama administration’s record on jobs, with Republicans hitting the stimulus and calling for an extension of the Bush tax cuts. To make, his case, however, Sen. Lindsey Graham (R-S.C.) completely distorted the effects of the stimulus, calling it a “disaster” and trying to tie it to millions of U.S. jobs lost. On NBC’s “Meet the Press,” Graham called for extending the Bush tax cuts, saying the U.S. taxes and spends too much. To make his claim, he said that the country has lost 2.5 million jobs since the stimulus passed. GREGORY: Republicans are so concerned about the deficit and overall spending picture in Washington, as Republican leaders say they are. When you talk about extending the Bush tax cuts, yes, it’s existing tax policy, but is there a responsibility for Republicans to say if you want to extend all of the cuts that somehow you have to pay for what the impact will be going forward beyond the expiration date on the Treasury? GRAHAM: Only if you believe that America taxes too little; I think America taxes too much, and we certainly spend too much. I would extend the tax cuts to create private sector jobs. If you increase taxes now at any level, it is going to make it harder to create jobs, and we’ve lost 2.5 million jobs since the stimulus package passed. We’re at 9.6 [percent] unemployment. So I don’t think we don’t tax too little; I think we spend too much. WATCH: While it’s true that there have still been jobs lost this past year , it’s not because of the stimulus. Graham’s faulting of the stimulus on America’s job situation goes against an Aug. 24 report by the nonpartisan Congressional Budget Office . From the report: On that basis, CBO estimates that ARRA’s policies had the following effects in the second quarter of calendar year 2010: – They raised real (inflation-adjusted) gross domestic product (GDP) by between 1.7 percent and 4.5 percent, – Lowered the unemployment rate by between 0.7 percentage points and 1.8 percentage points, – Increased the number of people employed by between 1.4 million and 3.3 million, and – Increased the number of full-time-equivalent jobs by 2.0 million to 4.8 million compared with what would have occurred otherwise (see Table 1). In other words, the stimulus put 3.3 million Americans to work. Similarly, on July 27, economists Alan Binder and Mark Zandi released a study showing that without a strong federal response — “Wall Street bailout, the bank stress tests, the emergency lending and asset purchases by the Federal Reserve, and the Obama administration’s fiscal stimulus program ” — the U.S. would probably have lost 16.6 million jobs — about “twice as many as were actually lost.” Additionally, the unemployment rate would have peaked at 16.5 percent. As David Lynch of USA Today recent wrote, “Eighteen months later, the consensus among economists is that the stimulus worked in staving off a rerun of the 1930s .” Obama’s presidential campaign manager, David Plouffe, also sharply defended the stimulus on NBC’s “Meet the Press” today, saying, “By the way, the Recovery Act that Republicans are attacking — if they had their way, we wouldn’t have done anything like that. We probably would have unemployment rate if Republican ideas and policies had been in place that drove us into this economic climate in the first place, we’d be sit here with unemployment almost double what it is with no positive growth, no glimmers that were coming out of this.” Zandi, who served as an economic adviser to McCain’s 2008 presidential campaign, said on CBS’s “Face the Nation” that the effects of Bush’s tax cuts on small businesses was being overblown. “On the margin some small business people won’t hire as aggressively, but that is an overdone argument,” said Zandi, adding that the main reason they’re not hiring is a “lack of confidence.” Economist Laura Tyson, who is a member of the president’s Economic Recovery Advisory Board, agreed, saying the tax cuts are “not the major reason they’re not hiring.” Zandi also advised against raising taxes on high-income households, saying they are ” very, very fragile .” On CNN’s “State of the Union,” National Small Business Association President Todd McCracken argued against letting the Bush tax cuts expire for businesses making more than $250,000, saying that although it’s a “minority of small companies,” they are “the more successful ones who are most likely to be growing jobs and the ones that we want to continue to be successful and we don’t want to put disincentives in place for them to do it.” AFL-CIO President Richard Trumka took issue with McCracken’s characterization, saying, “They’re not created by the 3 percent. They’re created — the vast majority are created by the other 97 percent. So it’s not fair to say most jobs are created by that top 3 percent, because they are not.” UPDATE: Economist Robert Shapiro looked at Bureau of Labor Statistics data and concluded : From December 2007 to July 2009 – the last year of the Bush second term and the first six months of the Obama presidency, before his policies could affect the economy – private sector employment crashed from 115,574,000 jobs to 107,778,000 jobs. Employment continued to fall, however, for the next six months, reaching a low of 107,107,000 jobs in December of 2009. So, out of 8,467,000 private sector jobs lost in this dismal cycle, 7,796,000 of those jobs or 92 percent were lost on the Republicans’ watch or under the sway of their policies. Some 671,000 additional jobs were lost as the stimulus and other moves by the administration kicked in, but 630,000 jobs then came back in the following six months. The tally, to date: Mr. Obama can be held accountable for the net loss of 41,000 jobs (671,000 – 630,000), while the Republicans should be held responsible for the net losses of 7,796,000 jobs. ************************* What’s happening in your district? The Huffington Post wants to know about all the campaign ads, debates, town halls, mailings, shenanigans, and other interesting campaign news happening by you. E-mail us any tips, videos, audio files, and photos to election@huffingtonpost.com .

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3 Reps Under Further Investigation Over Alleged Bank Bribery

August 31, 2010

WASHINGTON — House investigators have recommended that three lawmakers be further investigated to determine whether political contributions were improperly linked to votes on the huge financial overhaul bill. The independent House Office of Congressional Ethics recommended that the member-run House ethics committee pursue potential rules violations by Republicans John Campbell of California and Tom Price of Georgia and Democrat Joseph Crowley of New York. The ethics office recommended no further investigation of five other lawmakers in the same probe: Democratic Reps. Earl Pomeroy of North Dakota and Mel Watt of North Carolina, and Republicans Jeb Hensarling of Texas, Chris Lee of New York, and Frank Lucas of Oklahoma. All offices of the lawmakers had received letters from the OCE by Tuesday and made the conclusions public. President Barack Obama signed the financial overhaul bill into law July 21. It aims to restrain Wall Street excesses with the most sweeping overhaul of financial rules since the Great Depression, clamping down on lending practices and expanding consumer protections to address failures that precipitated the 2008 meltdown that knocked the economy to its knees. The Democrats – Crowley, Pomeroy and Watt – voted for the final bill. The Republicans – Campbell, Price, Hensarling, Lee and Lucas – voted against it. Campbell said he was “perplexed by OCE’s decision, as they have presented no evidence that would suggest wrongdoing.” Campbell added that he “always complied with the letter and the spirit of the law. To suggest otherwise is unfounded and untrue. In addition, my voting record and opposition to a culture of taxpayer-funded bailouts has been and always will be unshakable.” Price said it was “truly a mystery” that his case was referred for further investigation. “There being no evidence of any wrongdoing or any inconsistency in my policy position, one can only guess as to the motive behind their decision or even why they chose to initiate a review in the first place,” he said. “My constant allegiance to a transparent and conscious divide between my official duties as a member of Congress and my actions as a candidate is without question.” Crowley’s office said in a statement that he “has always complied with the letter and spirit of all rules regarding fundraising and standards of conduct.” All three lawmakers referred for further investigation had fundraisers last December, around the time of crucial House votes. Price had two fundraisers, including a breakfast on Dec. 2 and a luncheon Dec. 10 billed as a financial services event. A special guest was Rep. Spencer Bachus of Alabama, the ranking Republican on the House Financial Services Committee. Crowley had a cocktail reception Dec. 10. Campbell had fundraisers Dec. 8 and Dec. 9. Campbell and Price consistently opposed the regulation legislation. Crowley, after attending his fundraiser, returned to the House and voted against Democratic amendments aimed at toughening some financial regulations. In each case he joined more than 100 Democrats, including fellow New Yorkers, to vote against the proposed changes. ___ Associated Press writer Jim Kuhnhenn contributed to this report.

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West Virginia Mine Explosion Leads To More Enforcement And Disclosure

August 27, 2010

It was back on April 5, right around the afternoon shift change, when methane gas or coal dust or both suddenly ignited in the Upper Big Branch coal mine in West Virginia, sending a massive fireball shooting down its low-ceilinged passageways. Twenty-nine miners working in several different sections of the mine were killed instantly, making it the deadliest mining disaster in 40 years. The conflagration was so intense that federal officials investigating its cause had to wait two months before the risk of fire and the levels of methane in the air were low enough that they could start looking for clues underground. Today, Upper Big Branch remains closed to everyone but those investigators, who are still only partway through their methodical examination. Federal Mine Safety and Health Administration director Joseph A. Main went down into the mine a few weeks ago and all around him, he said, were signs of “a pretty violent explosion.” “You have ventilation controls that are destroyed — your block walls are blown out — you have residue from the heat and fire,” he said in an interview with the Huffington Post. The floors are littered with debris and damaged equipment. There was, Main said, “a vast area that was affected.” MSHA’s operating theory appears to be that something Massey did to the mine’s ventilation system let methane and possibly dust build up to explosive levels. Before the explosion, Upper Big Branch had received more “unwarrantable failure” orders — for safety violations that constitute more than just ordinary negligence — than any other mine in the country, Main said. Civil and criminal investigations are both underway. And federal officials have now disclosed that they found handheld methane monitors deep inside the mine that had maxed out, suggesting explosive quantities of the gas. “Without a doubt, something went wrong with the ventilation,” Main said. “Ventilation is used to render harmless methane in a mine. And that didn’t happen.” (The Charleston (W.Va.) Gazette , the Pittsburgh Post-Gazette and NPR are among the few news outlets that have continued to doggedly follow the story.) Meanwhile, as generally happens in response to a major accident, the regulatory environment is changing. After the explosion, MSHA was hammered for letting mines with alarming safety records exploit loopholes to evade fines and stay open. A June memo from the Department of Labor’s Inspector General found that between 2007 and 2009, MSHA apparently declined to subject some problem mines to closer scrutiny because it was too much work. Since the April explosion, Main has dramatically stepped up MSHA’s enforcement activities. A reform bill making its way through Congress would expand the mine regulator’s authority, but what’s already changed is that inspectors are now using preexisting powers to a much fuller extent — particularly their ability to conduct surprise inspections and pull workers out of mines with serious health hazards until those hazards have been abated. “We’re aggressively using the closure order as a tool of choice” Main said. “I see more withdraw orders than I ever saw in the past,” said Ellen Smith , the managing editor of Mine Safety and Health News . “MSHA’s always had power to issue them,” she said, “they just didn’t use the power that they had to the fullest extent. They’re doing that now. They’ve never done it before, under anyone.” MSHA statistics show 1,287 closure orders between April 5 and August 5 of this year, 285 more than during the same period last year. Smith said she’s even heard of surprise inspections in off hours. “For MSHA to go into a mine on third shift was unheard of,” she said. As the Associated Press reported Thursday , MSHA is cracking down on mine companies that tip off their underground workers before federal officials making surprise inspections can get down there themselves. And although the money hasn’t arrived yet, Congress recently appropriated $18.2 million for MSHA to prosecute appeals of its citations, and $3.8 million to the Federal Mine Safety and Health Review Commission to help reduce a massive backlog of cases. On the Hill, legislation introduced by Rep. George Miller (D-Calif.) has passed by the House Judiciary Committee but not the full House; Sen. Jay Rockefeller (D-W.Va.) has introduced nearly identical legislation in the Senate. The bills would give MSHA more leverage over mine operators with troubling safety records and would further protect workers who speak up about safety concerns. Meanwhile, the mammoth Massey Energy Company and its famously combative CEO, Don Blankenship, remain entirely unapologetic. Late last month, Blankenship lectured a Washington crowd about morals and said that accidents happen. “I believe that the physics of natural law and God trump whatever man tries to do,” he said. “Whether you get earthquakes underground, whether you get broken floors, whether you get gas inundations, whether you get roof falls, oftentimes they are unavoidable just as other accidents are in society.” That same day, his company officially tried to shift blame for the accident to a natural event — a crack in the mine floor that ostensibly created an unusually big and sudden burst of methane. Blankenship has also publicly urged the families of the victims to settle with the company without hiring lawyers or filing lawsuits. And just this week, he got his way with four of the families , who agreed to settle for undisclosed terms. Massey had previously offered families settlements of at least $3 million each. One of the most far-reaching changes to the mining industry since the April explosion may actually end up being the insertion — at the request of Rockefeller and his fellow West Virginia Democrat, the late Sen. Robert Byrd — of an amendment to the recently passed financial reform bill. The amendment, now law, requires publicly-traded mining companies to include serious mine safety violations in their public filings with the Securities and Exchange Commission. Unlike the citations themselves, these SEC filings are closely tracked by shareholders and industry analysts. Indeed, on August 23, Massey filed a notice with the SEC acknowledging that MSHA had, in an enforcement order issued on July 21, accused it of creating an “imminent danger” of death or serious physical injuries. As it turns out , MSHA investigators working their way through the Upper Big Branch mine had discovered a two-by-two-by-three-foot box labeled “explosives” in a conveyor belt tunnel. The explosives had nothing to do with the April 5 explosion, but nevertheless, this was a big deal. And because it was in an SEC filing, the market noticed. Massey Energy stock prices dropped suddenly, eventually falling $4.13, or 13 percent, over the next four days. Similarly, the first 10-Q quarterly reports were filed under the new law earlier this month, allowing stock analysts like SNL Financial to easily compare and contrast various companies’ safety performance. SNL concluded: Massey Energy Co. racked up, by a wide margin, the highest number of mine safety transgressions among U.S. public coal producers during the second quarter, according to data provided by the companies in their latest Form 10-Q filings. The U.S. Mine Safety and Health Administration assessed more than $4 million in proposed fines against Massey during the second quarter, a number that far and away exceeded the performance of other public U.S. coal companies. In fact, no other coal producer reporting safety data to the SEC was fined more than $1 million during the second quarter. “This information is really going to play a huge role in corporate responsibility,” Smith said. Meanwhile, what Main called “enhanced enforcement” continues. “We’re finding some pretty egregious things ,” he said, noting that one mine — Wilcoal Mining Inc.’s Tri-State One Mine in Claiborne County, Tenn. — stayed closed for three weeks while it fixed a series of ventilation-related violations, among others. Main, a former United Mine Workers of America safety official, had already been running MSHA for six months when the Upper Big Branch mine exploded. Some of the changes MSHA has made since the explosion were already in the works before that, he said. But would a more concerted crackdown before April have saved the lives of 29 miners? “I think anyone always looks back to figure out what went wrong. What did you miss? What did you miss? Those are things I’ll think about for the rest of my life,” Main said. “But the other thing is: you find it and fix it. You learn the lessons of the event and you plan the reforms pretty quick.” ************************* Dan Froomkin is senior Washington correspondent for the Huffington Post. You can send him an e-mail , bookmark his page ; subscribe to his RSS feed , follow him on Twitter , friend him on Facebook , and/or become a fan and get e-mail alerts when he writes.

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Jeff Madrick: Weak Financial Regulation Is Further Defanged

August 26, 2010

I sure hope somebody is going to notice the fine piece on the front page of Thursday’s New York Times about how easy it is to get around the Volcker rule. Remember how the Obama team that came up with its reregulation proposals seemed to push Paul Volcker aside? The former Federal Reserve chairman was supposed to be running a committee on the subject for the president, but even he let it be known no one was talking to him much. Volcker was concerned that commercial banks were using insured depositor money to make risky investments and to drive huge bonuses — and the Fed and the FDIC would be left picking up the pieces. The system should not be bearing that much risk, he wisely figured. And to be fair, he had long felt this way. After an earlier front page Times piece by Lou Uchitelle on Volcker’s concerns , Obama suddenly embraced a limitation on such trading — the Volcker rule. There were many Volcker photo ops. There would now be a ceiling on what trading could be done for the banks’ proprietary accounts — its own assets. The Dodd-Frank bill embraced the idea. Problem solved. No way, of course. The trouble is, banks have been trading for their own accounts to one degree or other for decades while making markets for their customers. In the late 1970s and early 1980s in particular, they first discovered they could generate big profits if they bought extra securities (or derivatives) at propitious times under the guise of keeping inventory to facilitate trades of their investors and corporate clients. They could also hedge their positions by selling. In truth, it wasn’t even a disguise. They gambled money, but like all market makers, they had an insider’s edge. And they made fortunes. Some of the investment bankers, in particular, loved the traders who took the big risks. Of course, occasionally, they lost big — and some of the losers made headlines. But mostly they made out like bandits. Over time, the lucrative practice was moved to the “proprietary” desks. That’s where Howie Hubler lost nine billion dollars in a mammoth mortgage transaction for Morgan Stanley, as reported by Michael Lewis in The Big Short . I was never clear why the press didn’t make more of that after Lewis divulged the unpublicized catastrophe. No one ever lost that much money on a trading desk before. Once not long ago, if you lost $200 million it was a scandal. Now Nelson Schwartz and Erich Dash have put their finger on what seemed to be hidden from view. The banks do a lot of this all the time, and they are doing it big-time again, the reporters found out. As they quote one consultant, “You can use client activity as a cover for basically anything you are doing.” And the fact is that they do, and have done so for a long time. As the Times reporters write, “For all the talk of shutting down trading desks and reassigning employees to prepare for the Volcker Rule, proprietary-style trading will probably survive, if under a different name.” So much for the Volcker rule. And the great man himself (that is, Volcker) never came to grips with this immense hole in the regulations, either. High risk on Wall Street will go on. Meantime, Sheila Bair found it necessary to argue in this week’s Financial Times that stronger capital requirements will make the financial system better — that is, help allocate capital where it is actually needed and useful. She apparently feels she has to defend higher capital requirements against influential complaints coming from the powerful financial community that they will undermine lending and raise interest rates. Yes, and regulations to limit oil spills will raise gas prices, higher wages will undermine corporate profitability and capital investment, and product safety standards will limit the number of toys parents can buy for their kids. Industry goes on and on. As if, suggests Bair, the earlier inadequate capital requirements resulted in no financial or social cost. Consider the credit crisis and the recessionary aftermath. The financial reregulation package was never strong enough, but the battle to make work even what was passed, will go on. Nothing is quite so irksome as the financial community talking about how little TARP cost taxpayers as banks paid back their bailouts. First, TARP should probably have made money, like Warren Buffett will on the money he lent Wall Street. But second, the big cost is severe and ongoing recession resulting in hundreds of billions of dollars of lower federal tax revenues for years, unemployment rates near ten percent, and weak capital spending. Let’s keep straight how much financial excess has and will continue to cost America. Cross-posted from New Deal 2.0 . Sign up for weekly ND20 highlights, mind-blowing stats, event alerts, and reading/film/music recs.

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Gulf Oil Spill: New Guidelines Could Rule Out Many Oil Claims

August 21, 2010

MIAMI — A flower shop in Florida that saw a drop-off in weddings this summer is probably out of luck. So is a restaurant in Idaho that had to switch seafood suppliers. A hardware store on the Mississippi coast may be left out, too. The latest guidelines for BP’s $20 billion victims compensation fund say the nearer you are geographically to the oil spill and the more closely you depend on the Gulf of Mexico’s natural resources, the better chance you have of getting a share of the money. Also, a second set of rules expected this fall will require that businesses and individuals seeking compensation for long-term losses give up their right to sue BP and other spill-related companies – something that could save the oil giant billions. The new rules for the claims process were released Friday by Washington lawyer Kenneth Feinberg, who was picked by President Barack Obama to run the fund and previously oversaw claims for 9/11 victims. Beginning Monday, the claims will be handled by Feinberg rather than BP, which is still footing the entire $20 billion bill. Who gets paid and who doesn’t will depend largely on how much proof there is that losses were caused by the spill and not by something else, such as the recession. Feinberg’s guidelines say key factors include a claimant’s geographic proximity to the disaster and how much the business or property is linked to “injured natural resources.” Feinberg elaborated on his reasoning during town meetings this week in Louisiana. “How close are you to the beach? To the Gulf? BP got claims from restaurants in Idaho. Go figure,” he said. “How close are you? That’s a major factor. How dependent are you, as an individual or a business, on the resources of the Gulf?” That worries business owners like Susan Mitchell, who runs a flower shop about a mile from Pensacola Beach, Fla., where tarballs from the spill washed up. She said her business was down about $4,000 this year in July from the year before. “But it is hard to prove exactly why that is and everyone keeps telling us we have to prove that it was because of the oil,” she said. “We usually have beach weddings all summer. We deliver to hotels with people having birthday parties and celebrations on the beach.” Jeffrey Breit, a Virginia-based lawyer who represents more than 600 Gulf Coast fishermen, said the geographic limitations will certainly cut out many deserving claimants. “I think it’s unfair to draw arbitrary geographic lines when it is clear that many businesses rely on the natural resources of the Gulf for their livelihoods,” Breit said. The new rules govern emergency claims that can be made between Monday and Nov. 23 at Gulf Coast claims offices, by mail or through the Internet. Feinberg said his goal is to issue emergency checks within 24 hours for individuals and seven days for businesses. Many people have complained about the sluggish BP process. The attorneys general of Alabama and Florida sent Feinberg letters objecting to many of the new rules. Florida’s Bill McCollum said people will face a much heavier burden of proof trying to show the spill caused their losses. “The current process appears to be even less generous to Floridians than the BP process,” McCollum wrote. “Such an outcome is completely unacceptable.” Those seeking emergency payments will not have to give up their right to sue BP and other companies. But the rules for final, long-term settlements will include a waiver of that right. That drew protests Friday from a leading trial lawyers group, the American Association for Justice, which said the rule could force claimants to decide whether to accept a BP payment or go to court before the full extent of the damage is known. For example, attorneys said, there could be health effects that take years to develop, or environmental damage that might not surface for years. “BP is trying to cut off damages. They realize that small payments will be grabbed by some, and then in the future they will have no access to justice,” said Jere Beasley, a Montgomery, Ala., lawyer who is representing oil spill clients. “Which is sad, but true.” But many people might choose to file a claim because lawsuits can drag on for years and because attorneys often take one-third of any damages as their fee. Already more than 300 lawsuits have been filed against BP and other companies involved in the disaster, which began April 20 with an explosion aboard an offshore oil rig that killed 11 workers. At Diamondhead, Miss., along the Gulf Coast, Don Farrar, owner of Diamond Ace Hardware and Diamondhead Florist, said he has received two checks from BP for thousands of dollars but is worried what will happen when the claims process changes hands. He said the spill’s economic toll has reached far beyond fishermen and tourist businesses. “I have a hardware store and a florist. Even my florist is down,” he said. “When a fishermen is not making money, he’s not going to be buying a house, he’s not going to be painting his house, and he’s not going to be buying paint from me.” ____ Associated Press writers Melissa Nelson in Pensacola, Fla., Mary Foster and Kevin McGill in New Orleans, Holbrook Mohr in Jackson, Miss., and Jay Reeves in Birmingham, Ala., contributed to this story. ____ Online: Gulf Coast Claims Facility: (goes live Aug. 23) http://www.gulfcoastclaimsfacility.com

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Deepwater Drilling Ban Costs 23,000 Oil Jobs

August 21, 2010

WASHINGTON (Associated Press) – The deepwater drilling moratorium in the Gulf of Mexico costs at least 23,000 jobs, according to a federal document that weighed the economic impact and alternatives to the drilling ban. A six-month suspension would directly put 9,450 people out of work and indirectly affect nearly 14,000 other jobs, according to a memo from Michael Bromwich, the nation’s top drilling regulator. The July 10 memo to Interior Secretary Ken Salazar outlined several options regarding the suspension of offshore drilling. Salazar issued a moratorium in June, but it was struck down by a federal judge in New Orleans after oil and gas drilling interests said it wasn’t justified following the Gulf oil spill. The Obama administration issued a new moratorium July 13 — three days after the memo — that stressed new evidence of safety concerns. The White House hopes the revised ban will pass muster with the courts. The moratoriums were put in place following the Deepwater Horizon rig explosion April 20 that killed 11 people. Millions of gallons of oil spilled into the Gulf after the rig sank. Some energy experts, engineering consultants and Gulf Coast leaders have joined Big Oil to ask Salazar to change his mind. Drilling was safe before the BP spill, they said, and Gulf communities that depend on the industry were suffering unfairly. Interior Department spokesman Matt Lee-Ashley said the agency has been very clear that the economic impacts of the moratorium would need to be addressed and noted the Obama administration secured an agreement with BP to set up a $100 million fund for affected rig workers. “In light of the current risks of deepwater drilling as illustrated by the BP Deepwater Horizon Spill and the potential impacts of another spill, the moratorium is necessary and appropriate. With that said, the worst-case economic impact estimates from three months ago have not been realized. The reality on the ground suggests that the impacts are less than we initially projected as a potential worst-case scenario,” Lee-Ashley said.

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Danny Schechter: Countdown to Collapse? The Recovery Is Not

August 18, 2010

Financial journalist Charles Gasparino, whose career trajectory took him from Newsweek to CNBC to Fox News, was on with Bill O’ Reilly doing what the host of the factless Factor likes to do the most: promote Fox News. In the course of their self-promotional banter, Gasparino let slip an unverifiable story about a meeting of top CEOs speculating about whether President Obama really is a secret Socialist. Stories like this, invented or not, freak a White House ever eager to reassure the business world of their loyalties. That is no doubt why Robert Gibbs, the President’s Press Secretary took a whack at the “professional left,” a statement he later said had been “inartful” but did not withdraw. Writing on OpEd News, Kevin Gosztola was not surprised: While circumstantial, the best evidence for why Gibbs would feel like uttering the aforementioned remarks is the shift of money from Wall Street to Republicans ahead of the election… The Democrats earned 57 percent of campaign contributions from securities and investment industries. The situation compels the Obama Administration, especially White House press secretary Gibbs, to whip the left and the sections that are most listened to by voters into line not only because money from business interests needs to swing back the other way but because disappointed and disillusioned voters will likely stay home, not donate to Democratic Party campaigns, not make phone calls, and refuse to go door-to-door canvassing prior to Election Day if they do not fall in line. According to a preliminary analysis, the Center for Responsive Politics reports that “individuals and political action committees linked to the financial and real estate sectors swung hard to the Republicans with their giving since last year…. In March 2009, 70 percent of money from the sector went to the governing party, but by this summer, 68 percent was going to the opposition, as Democrats fought to pass some version of a financial overhaul.” The motivation for Gibbs’ remarks may or may not be tied to signaling Wall Street but the deeper truth is that everyone, right and left alike, seem frustrated and at the same time powerless to check the continuing economic decline. The private sector is not creating jobs. The GOP is blocking the government from doing more stimulus programs while the system seems to be unraveling. All the talk of cutting deficits by conservatives or ending tax cuts by liberals will not give the economy the boost it needs. There is a paralysis of analysis and a stalemate. The markets were more freaked by the recent pessimism oozing from the Fed than any partisan punditry. The slowdown they are worried about has already doomed any heavily-hyped “recovery.” And the public knows it, according to the recent polls. What’s worse is the tea leaves offer few signs of a turnaround any time soon even if General Motors is selling more cars — many, may we be reminded, in China. (The GM CEO who last week took a nasty ingrate smack at GM being perceived as “Government Motors,” demanding the government sell all of its shares, has just announced he is leaving! I wonder why?) The Carlyle Group is taking over while the automaker launches a new program of subprime lending, the very predatory dealmaking that got them in trouble in the first place. Does anyone ever learn from history, or care about how communities are being destroyed as a financial crisis becomes a social crisis at the grass roots level? Check out what happened at that mall in Atlanta where thousands of people nearly rioted to get on a public housing waiting list. The Congress returned from its recess to pass new monies to keep teachers teaching and cops patrolling. They did so by slashing food stamps so the unemployed and poor — some 41 people who rely on them — will have to cut back further. What a trade-off. As for insuring the stability of an increasingly volatile system, will the new financial reforms make any difference? It doesn’t look like it. The New York Times reported, “As Wall Street scrambles to find the best and most profitable way to operate under the new financial reform law, Goldman Sachs Group Inc. — the firm that was expected to suffer the most under the legislation — could emerge practically unscathed… “…we think we are well positioned to be a market leader under the new rules,” said Jack McCabe, co-head of Goldman’s derivatives clearing service business. Richard Bove, a bank analyst at Rochdale Securities, said he had changed his view of the law’s effect on Goldman. “I thought this company was going to be really harmed by this bill; now I’ve figured out that it’s not going to happen,” he said. “They should win big here.” That’s Goldman’s reason to celebrate its “big win” What about the others? The truth is we will not know for a awhile, for a long while, for many, many years. So much for any sense of urgency even after former Fed Head Paul Volcker said we are running out of time. Bloomberg News explained why: “Many of the measures ordered by Congress and global regulators, aimed at cushioning the financial system in future crises, are years away from being implemented. The Basel Committee on Banking Supervision plans to give the world’s banks until 2018 to comply with limits on how much they can borrow. Parts of the Volcker rule, a provision of the new Dodd-Frank Act that would force firms to cut stakes in in-house hedge funds and private-equity units, may not go into effect for a dozen years…” “Based on our experience of government’s ability to execute these things effectively and in a timely way, we are almost uncovered now from any future financial risk for at least another 8 or 10 years, and that’s a little scary,” said Roy Smith, finance professor at New York University’s Stern School of Business and a former banker at Goldman Sachs Group Inc. Economist Nouriel Roubini, one of the first to forecast our crisis, worries that major economies in Europe are at risk and could fall. At the same time I am reading articles that contend, “The US is more bankrupt than Greece.” Another reports the IMF saying the US is bankrupt but most Americans don’t know it. What else don’t we know? At the same time, the folks who brought us this crisis are still riding high, making multi-million dollar “settlements’ to cover up fraudulent practices. In recent weeks, Goldman Sachs, Countrywide and, now, Wells Fargo have just done that in part to avoid prosecutions. Their CEOS are going on vacation to spend their ill-gotten gains, not to jail to pay for their crimes. And the “professional left” — whatever that is supposed to be — is more pissed at Robert Gibbs blathering at that podium than the banksters maneuvering behind the scenes. Can anyone tell me what’s wrong with this picture? Just one footnote: In this week of growing economic despair, an 81 year old senior citizen named Bernard Stone stood outside the unemployment office in Harlem with a flyer of his own making calling on President Obama to issue an executive order closing all American-owned factories outsourcing jobs. If they don’t do it, their executives should, he suggests, lose their citizenship and be deported to the countries to which they exported American jobs. “The hundred or so people who read my leaflet liked that part,” he told me. News Dissector Danny Schechter directed the film Plunder The Crime of Out Time to investigate the financial crisis as a crime story. (Plunderthecrimeofourtime.com) Comments to dissector@mediachannel.org

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Obama Approval Rating Hits New Low For Handling Economy (POLL)

August 18, 2010

WASHINGTON — President Barack Obama earned his lowest marks ever on his handling of the economy in a new Associated Press-GfK poll, which also found that an overwhelming majority of Americans now describe the nation’s financial outlook as poor. A frustrated electorate could take it out on the party in power – Obama’s Democrats – in the November elections. Eleven weeks before the Nov. 2 balloting, just 41 percent of those surveyed approve of the president’s performance on the economy, down from 44 percent in April, while 56 percent disapprove. And 61 percent say the economy has gotten worse or stayed the same on Obama’s watch. Still, three-quarters also say it’s unrealistic to expect noticeable economic improvements in the first 18 months of the president’s term. And Obama’s overall approval rating was unaffected; it remained at 49 percent, in part because most Americans still like him personally. Americans’ dim view of the economy grew even more pessimistic this summer as the nation’s unemployment rate stubbornly hovered near 10 percent. That’s been a drag on both Obama and Democrats, who control Congress. “The economy is on life support,” says Scott Bradley, 38, general manager of a carpet store in Columbia, Mo. Bradley says he voted for Obama in 2008 but he wouldn’t again. He blames Congress for the unemployment woes but says, “Obama’s policies are making the economy worse.” Even staunch Obama backers like college student Julius Taylor of Flint, Mich., struggle to stay optimistic about the economy, particularly when they see the recession’s toll in their backyard. “I’d like to say it’s improving, but there are a lot of indicators it’s not,” says Taylor, 25. Viewpoints like those have Democrats on edge as they try to hang onto comfortable majorities in the House and Senate in a political environment made ever more challenging by economic woes. Republicans are trying to convince Americans that the GOP can create the jobs that Obama hasn’t delivered. Obama and his Democrats are pleading for the frustrated public to give them more time to prove that their economic fixes will work. “The truth is, it’s going to take a few years to fully dig ourselves out of this recession. It’s going to take time to bring back 8 million jobs,” the president said Tuesday while campaigning for Democratic candidates in Seattle. “Anybody who tells you otherwise is just looking for your vote.” Democrats are keenly aware that they face strong headwinds; 60 percent of people say the country’s headed in the wrong direction. And it’s hard to overstate the importance of the economy to voters; 91 percent of Americans say it’s a top problem, with unemployment close behind. A whopping 81 percent of people now call the economy poor or very poor, up from 72 percent in June, and just 12 percent say it has improved in the past month, compared with 19 percent in June. Both are record measurements since AP-GfK started asking those questions. “Everyone is scared – everyone,” says Gerda Chapman, 63, a retired schoolteacher in Harrison, Idaho, who backed Obama and isn’t ready to ditch him. “The man has not had a long enough time and he’s doing a good job.” She, like him, urges patience: “We’re not out of the recession and we’ve got a ways to go. It’s going to take time, but it is on an upward trend.” Stacey Pederson, 36, a massage therapist and independent voter in Asheville, N.C., agrees that it’s improving. But, she says, more progress would be made “if we would have cooperation within the two parties. It’s getting to be really difficult watching them fight.” Neither party is faultless, adds Jeff Vick, 49, a self-employed consultant from Fort Worth, Texas. “Republicans have just been incredibly greedy,” he says, and Democrats are instituting “un-American” policies that inhibit citizens’ abilities to earn a living. People have little trust in Democrats or Republicans on handling the economy; less than half trust either. But voters older than 64 and whites lean heavily toward the GOP. While Congress’ overall performance rating is at a miserable 24 percent, Democrats in Congress are slightly more popular than Republicans; 37 percent approve of Democrats while 30 percent approve of Republicans in Congress. But in a shift from earlier this summer, when Democrats had an advantage, Republicans now are about even with Democrats on the question of which party should win control of Congress. Among registered voters, 49 percent say they would vote for the Republican candidate in their congressional district – half say to express their opposition to Obama – while 45 percent say they’d cast their ballot for the Democrat. Obama is suffering in other areas, too. Just 34 percent now call him an above average or outstanding president, down from 42 percent in January. And 28 percent call him average, while 38 percent say he’s even worse. Marks on how people view him personally have fallen: 89 percent liked him personally in January, but now 82 percent do. Also, more people disapprove of his performance on the following issues than approve: the federal budget deficit, unemployment, health care, taxes and immigration. Conversely, he’s viewed more favorably than not on his handling of terrorism, the environment, relationships with other countries and education. About equal percentages of people view him positively and negatively on Iraq, Afghanistan, energy and gas prices. The AP-GfK Poll was conducted Aug. 11-16 by GfK Roper Public Affairs and Corporate Communications. It involved landline and cell phone interviews with 1,007 adults nationwide and has a margin of sampling error of plus or minus 4.5 percentage points. ___ Associated Press Polling Director Trevor Tompson, AP News Survey Specialist Dennis Junius and AP writers Alan Fram, Lauren Sausser and Natasha T. Metzler contributed to this report. ___ Online: AP-GfK Poll: . http://www.ap-gfkpoll.com

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China’s Slowdown Sends A Chill Through Trade Partners

August 17, 2010

BEIJING — China’s abrupt growth slowdown is sending a chill through Asian economies and as far away as Australia and Africa as its voracious demand for imports fades. Beijing is cooling its economy with lending and investment curbs after explosive 11.9 percent first-quarter growth fed fears of overheating. Growth is slowing more sharply than expected, cutting demand for American and European factory machinery, industrial components from Asia and iron ore and other raw materials from Australia and Africa. The timing is awkward for exporters that were buoyed by China’s quick rebound from the global crisis and are seeing sales elsewhere weaken. The country had become more important than ever to its neighbors as its stimulus-driven expansion helped to cushion the blow of weak U.S. and European sales. “It’s definitely going to show in slower growth in all of the Asian economies that send goods to China,” said Mark Walton, senior economist for brokerage CLSA Asia-Pacific Markets. China, which overtook Japan as the second-biggest economy in the second quarter, is a major market for Asian nations. It buys 28 percent of Taiwan’s exports, 25 percent of South Korea’s and more than 20 percent of mining giant Australia’s. More than half of Hong Kong’s exports go to the mainland. Japan, which Monday reported sharply lower second quarter growth, saw a significant slowing in exports to China during the period. Its exports to China in April were up 41 percent from a year earlier but by June the growth rate had slackened to 22 percent. But suppliers of iron ore for steel production and other raw materials are expected to be hardest-hit by slowing growth in China. They range from Australia, Indonesia and Malaysia to Brazil and parts of Africa and profited from a construction boom fed by China’s 4 trillion yuan ($586 billion) stimulus and a flood of bank lending. “Chinese efforts to prevent overheating in asset markets will have negative effects on our markets,” CEO Tom Albanese of Anglo-Australian miner Rio Tinto Ltd. said this month. Construction faded fast as Beijing wound down its stimulus and clamped down on credit in April to prevent bubbles in real estate and stock prices. That slowed a surge in housing costs but slashed demand for steel, cement and other materials. That prompted some forecasters to cut their growth outlook for this year, though they say China easily can meet the government’s target of 8 percent. The expansion in Chinese factory output, retail sales and investment slowed so sharply that some analysts said Beijing might need to ease its controls to revive growth, which fell to 10.3 percent in the second quarter and is expected to drift lower. July import growth fell to 22.7 percent over a year earlier from June’s 34.1 percent, startling economists who expected a decline of only a few percentage points. Housing sales plunged 19.3 percent from a year earlier and auto sales weakened. Suppliers of manufactured goods also face a hit, though less severe. Taiwan is a major source of components for Chinese factories that make televisions and other electronics, many for export to the United States. The island could suffer a double blow as Chinese and U.S. spending weaken at the same time. “I expect to see smaller economic growth for quarter two than quarter one, and the upcoming quarters will again see smaller growth than quarter two,” said Hu Chung-ying, vice chairman of the Cabinet’s Council for Economic Planning and Development. ___ Associated Press Writers Debby Wu in Taipei and Tanalee Smith in Adelaide, Australia, contributed to this report.

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Steve Parker: Is NHTSA Working for Toyota or To Find the Truth?

August 12, 2010

Last week we asked, based on conclusions drawn by a Wall Street Journal auto industry reporter, if Toyota had been right along with their contention that “driver error,” and not electronic gremlins, was the main culprit behind thousands of owner claims of “unintended acceleration.” Not to mention the hundreds of injuries and even several deaths which are claimed to be the result of known problems in Toyota-built vehicles, cars and trucks both. Readers responded with their own thoughts on what could now be called “the Toyota scandal.” It appears that, among this blog’s readers, at least, the majority of people responding felt there was something wrong with these Toyotas and that owners were possibly being left out in the cold with Toyota’s claims of driver error. A report in Tuesday’s Automotive News , the world’s daily publication of record for the auto industry, would seem to bolster the company’s claims … especially so, considering Toyota says their source for this information is from NHTSA, the US agency of record when it comes to automotive safety. Here’s what Automotive News said: “Brakes weren’t applied by drivers of Toyota vehicles in at least 35 of 58 crashes blamed on unintended acceleration, U.S. auto-safety regulators said after studying data recorders.” The National Highway Traffic Safety Administration also saw no evidence of electronics-related causes for the accidents in reviewing the vehicle recorders, known as black boxes, the agency said today in a report to lawmakers. The preliminary findings bolster Toyota’s contentions that there’s no evidence of flaws in electronic controls on its vehicles and that motorists in some cases confused the accelerator and brake pedals. Toyota, the world’s largest automaker, has recalled more than 8 million vehicles worldwide in the past year for defects such as pedals that stuck or snagged on floor mats. “At this early point in its investigation, NHTSA officials have drawn no conclusions about additional causes of unintended acceleration in Toyotas beyond the two defects already known — pedal entrapment and sticking gas pedals,” the agency said in the report provided for a briefing to lawmakers in Washington. In addition to the 60 percent of cases where brakes weren’t used, NHTSA cited accidents in which the brakes were applied partially or the data recorder failed. Toyota has conducted more than 4,000 on-site vehicle inspections, and said today it has not found electronic throttle controls to be a cause of unintended acceleration. “Toyota’s own vehicle evaluations have confirmed that the remedies it developed for sticking accelerator pedal and potential accelerator pedal entrapment by an unsecured or incompatible floor mat are effective,” the company said. “We have also confirmed several different causes for unintended acceleration reports, including pedal entrapment by floor mats, pedal misapplication and vehicle functions where a slight increase in engine speed is normal, such as engine idle up from a cold start or air conditioning loads.” In all of the cases studied by federal regulators, the driver made an allegation of unintended acceleration. Of the 58 recording devices analyzed, 35 showed that at the moment of the crash impact, the driver hadn’t depressed the brake pedal at all, safety officials said. Fourteen more cases showed partial braking. In another nine cases, the brake had been depressed at the “last second” before impact. The government’s preliminary examination also said there were a handful of other crashes where the brake was pressed early and released, or in which the brake and gas pedals were pressed at the same time. There was one case of pedal entrapment by a floor mat. In five cases, NHTSA said, the electronic recording device failed to work. The agency is continuing its review of Toyota defects and is working with NASA, the U.S. space agency, and the National Academy of Sciences to probe the cause of the crashes.” So how WILL this all turn out? No one wants to jump to conclusions, especially considering that both Toyota and US government agencies are terribly litigious. And no one wants to get caught-up in what I think will be a long and international court battle between the entities involved. But there still is freedom of the press, at least last time I checked. Given that, what’s the next move by either Toyota and/or NHTSA? We all knew this would be solved (or made more involved) in the courts. I know people from Toyota and NHTSA (and more) read this blog and this is kind of a back-door way of giving your opinion directly to the participants; as if we’re Switzerland or Finland — that usually and officially secret third party in negotiations about, for instance, the Middle East — and we’re shuttling messages between the two main parties. So now’s your chance! What happens next? And why? And are you happy with it? And how should we treat NHTSA’s report which seems to take Toyota’s claims of “no electrical problems” with even less than a grain of salt? Listen and join-in with Steve Parker every weekend on www.TalkRadioOne.com … Visit that site to find out local showtimes in your area!

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Texas Sues Obama Administration Over ‘Unjustified’ Deepwater Drilling Moratorium

August 11, 2010

HOUSTON — The Texas attorney general sued the Obama administration Wendesday over its new deep-water offshore drilling moratorium, claiming it is unjustified and federal officials did not contact the state before issuing the ban. Attorney General Greg Abbott filed the 18-page suit in federal court in Houston against Department of the Interior Secretary Ken Salazar. The ban halted the approval of any new permits for deep-water projects and shut down drilling at 33 exploratory ocean wells in the wake of the BP spill in the Gulf of Mexico. In his lawsuit, Abbott called the ban “an unjustified, arbitrary and capricious policy that will inflict harm upon coastal communities.” Also, the suit said, federal officials did not coordinate with the state or consider the economic impacts before issuing the moratorium. Texas is one of the nation’s most active oil refinery states. State figures show there were 86,900 jobs in oil and natural gas extraction in April and an additional 107,800 in support industries. Interior Department spokeswoman Kendra Barkoff defended the ban but declined to comment specifically on the Texas lawsuit. “The Deepwater Horizon/BP oil disaster has made it clear that we need better health, safety and environmental standards for drilling operations,” Barkoff said in an e-mailed statement. “The temporary pause on deep-water drilling that Secretary Salazar has put in place is simply common sense, and we continue to stand behind it.” The current moratorium replaced one that was blocked by the courts. The Interior Department says it’s meant to give to give oil and gas companies time to implement adequate safety measures. The ban is in effect until Nov. 30, unless federal officials determine deep-water drilling operations have gotten safer. Also Wednesday, the Justice Department asked a federal judge who overturned the initial moratorium to throw out that court challenge filed by several offshore service companies, arguing that it is moot now that the new ban is in place. Company lawyers, however, claim the second moratorium is a “carbon copy” of the first and is a sham designed to circumvent U.S. District Judge Martin Feldman’s earlier order by prolonging the court challenge. The new ban does not seem to deviate much from the original moratorium in that it still targets deep-water drilling operators while defining them in a different way. ESNCO Offshore Co. has filed a separate lawsuit challenging the new moratorium. Feldman also is presiding over that case. Meanwhile, the Interior Department is hosting eight forums – including a Houston session in September – to gather information from experts and federal, state and local leaders about drilling safety reform, well containment and oil spill response. With that information, officials plan to consider whether to continue, end, reduce or expand the moratorium. ___ Associated Press Writer Michael Kunzelman in New Orleans contributed to this report.

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Bill Singer: The Big Oops! Morgan Stanley’s Research Failures

August 11, 2010

In a Press Release titled: FINRA Fines Morgan Stanley $800,000 for Deficient Conflict of Interest Disclosures in Equity Research Reports and Public Appearances by Research Analysts Firm Also Violated 2003 Research Analyst Settlement at, the Financial Industry Regulatory Authority (FINRA), Wall Street’s largest self-regulatory organization, announced on August 10, 2010, that it has censured and fined Morgan Stanley & Co., Inc. $800,000 for failing to make public disclosures required by FINRA’s rules governing research analyst conflicts of interest. The firm also failed to comply with a key provision of the 2003 Research Analyst Settlement by failing to disclose the availability of independent research in customer account statements. In addition to the censure and fine, Morgan Stanley must review a sample of its research reports and certify to FINRA that they comply with FINRA’s research analyst conflict-of-interest rules. These reviews and certifications must take place every six months for two years. Four Years of Non-Disclosure. Thousands of Incidents. FINRA found that from April 2006 to June 2010 , Morgan Stanley issued equity research reports that failed to disclose accurate information about the relationships Morgan Stanley, or its analysts, had with companies covered in its research reports. Overall, these inaccuracies resulted in approximately 6,836 deficient disclosures in about 6,632 equity research reports and 84 public appearances by research analysts. Among the deficient disclosures were: Securities holdings of an analyst, or a member of the analyst’s household, in a subject company; Morgan Stanley’s receipt of investment banking and non-investment banking revenue from subject companies; Morgan Stanley’s role as a manager, or co-manager, of a public offering of securities for subject companies; Morgan Stanley’s role as a market maker for certain subject companies’ securities; and Price charts for securities covered in equity research reports and the valuation method used to support published price targets. Moreover, Morgan Stanley did not disclose in approximately 127,600 monthly account statements sent to customers from August 2007 to February 2008 that it had available independent, third-party research. The requirement to provide customers with this notification was part of the Securities and Exchange Commission’s final agreement with Morgan Stanley as part of the 2003 Research Analyst Settlement and was incorporated into a separate agreement with FINRA. FINRA Gives Credit for Self-Review and Self-Reporting — gee, that’s nice In determining the appropriate sanctions in this matter, FINRA considered Morgan Stanley’s self-review and self-reporting of some of its disclosure violations and remedial steps taken by the firm, as well as a prior FINRA settlement that found the firm violated FINRA’s research analyst disclosure rules. In settling this matter, Morgan Stanley neither admitted nor denied the charges, but consented to the entry of FINRA’s findings. Bill Singer’s Comment: For those of you who still desperately cling to the belief that allowing Wall Street to self regulate itself works, perhaps this case may yet change your mind. Consider that for a four-year period from April 2006 to June 2010, Morgan Stanley issued over 6,000 research reports with deficiences — yet, amazingly, no regulator seemed to have had a clue about these violations. If I were being a truly obnoxious, sarcastic bastard, I might suggest that the regulators failed to timely detect Morgan Stanley’s violations because Wall Street’s cops were all hot on the trail of both Madoff and Stanford. But I”m not that crude a pundit. Course not. I mean, you know, it’s not like Bernie and Sir Alan were up to their shenanigans for over a decade, right under the formidable noses of so many regulators. In April 2003, the U.S. Securities and Exchange Commission (SEC), the New York Stock Exchange (NYSE), the National Association of State Securities Administrators (NASAA), and the New York State Attorney General announced the final terms of the Global Settlement of Conflicts of Interest Between Research and Investment Banking (Global Settlement), which resulted from joint regulatory investigations into conflicts of interest between investment banking and securities research at brokerage firms. As a result of that high profile and much ballyhooed investigation, ten of the nation’s top investment firms agreed to pay $1.4 billion: $387.5 million of it in restitution to be returned to harmed investors through a process overseen by the SEC, and $487.5 million in penalties. Funds were also earmarked for investor education and to help pay for independent research for investors. And let us not forget that the regulators required that the settling firms also agreed to reforms in the way they do business to help prevent these conflicts in the future. Not only were the financial penalties supposed to send the proverbial message and get the big boys’ attention, but they were also made to promise, no fingers crossed, cross my heart and hope to die, that they would change their wayward ways. FINRA is more than happy to toot its own horn when trumpeting its own settlements with the firms involved in the 2003 Global Settlement. Morgan Stanley’s settlement with FINRA’s predecessor, the NASD, resulted in the imposition of a Censure, $25 million fine, $25 million disgorgement, and $75 million earmarked for the “procurement of Independent Research.” Add it up — that’s $125 million dollars. If nothing else, since 2003, someone at FINRA should have been paying attention to Morgan Stanley’s compliance with the terms of the settlement. Hell, given all the bucks paid by the brokerage firm, at the very least FINRA could have hired one full time employee to do nothing but monitor Morgan Stanley! Then there is this odd tidbit from the August FINRA settlement. From August 2007 through February 2008, a period of six months, Morgan Stanley did not disclose in approximately 127,600 monthly account statements sent to customers that it had available independent, third-party research. That specific requirement to provide customers with this notification was part of the 2003 Research Analyst Settlement and was incorporated into a separate agreement with FINRA. Think about that. For six months statements went out that failed to disclose the availability of independent, third-party research — a disclosure that was among the alleged keystone achievements of the 2003 settlement. Maybe I’m just dense but did anyone at the SEC or FINRA even bother to monitor Morgan Stanley’s monthly statements for this mandated disclosure — you know, like for even one month during the six in question? After all, hundreds of millions of dollars later, many promises later, years later, Morgan Stanley agreed to print a disclosure on its statements that indicated the availability of the independent research. Apparently, that disclosure didn’t make it on to the statements. Sort of an easy omission to spot, no? And the excuse from Wall Street’s cops is what? They were too busy on other more important things? We didn’t see it. Is that the sorry state to which Wall Street’s regulators have fallen? Of course, if you’re not looking, you can’t see anything. Moreover, given that FINRA is crediting “Morgan Stanley’s self-review and self reporting of some of its disclosure violations. . .” you have to wonder whether any regulator would have uncovered this long-term, massive disclosure failure by Morgan Stanley but for the firm’s own efforts to come clean. I guess that NASD/FINRA settlement didn’t really get it done. Not for all the publicized million dollar fines and the self-aggrandizing regulatory publicity. After all, it was only three years after the 2003 Global Settlement that Morgan Stanley returned to its former errant ways. And for good measure, it appears that Morgan Stanley kept it up for more than four years. So much for self-regulation sending a meaningful message to its larger member firms. Of course, if this matter had involved, say, a smaller FINRA member firm, I’m sure that some heads would have rolled and folks would have been suspended, if not barred. But, things are as they are. The high and mighty on Wall Street get to write out fat checks and say “sorry.” Line forms to the rear, get behind Goldman Sachs, then Morgan Stanley. No cutting in. READ THE FULL-TEXT NASD APRIL 2003 MORGAN STANLEY ACCEPTANCE, WAIVER AND CONSENT (AWC) SETTLEMENT at http://www.finra.org/web/groups/industry/@ip/@enf/@da/documents/industry/p007676.pdf READ THE FULL-TEXT FINRA AUGUST 2010 MORGAN STANLEY ACCEPTANCE, WAIVER AND CONSENT (AWC) SETTLEMENT http://www.finra.org/web/groups/industry/@ip/@enf/@ad/documents/industry/p121898.pdf

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Reggie Middleton: What Do Goldman Sachs and B.B. King Have in Common? The Thrill Is Gone, Baby!

August 10, 2010
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Reggie Middleton: What Do Goldman Sachs and B.B. King Have in Common? The Thrill Is Gone, Baby!

August 10, 2010
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Adam Green: Google Goes "Evil"

August 9, 2010

I just got off a media conference call with Google CEO Eric Schmidt and Verizon CEO Ivan Seidenberg. They announced a new policy recommendation that would kill the Internet as we know it, if implemented by FCC Chair Julius Genokowski and other policy makers. The Google/Verizon deal ( also posted online ) basically says: The old “wireline” Internet that will be irrelevant in a few years? We propose a “new, enforceable prohibition against discriminatory practices” on that. New “wireless services” (aka the entire future of the Internet)? No equivalent nondiscrimination rules for that, but we'll “create enforceable transparency rules.” That way, as Americans lose access to the free and open Internet, they can visibly watch it go away. Just in case “wireless services” doesn't encompass the entire future of the Internet, a new class of “new services” is envisioned, which Schmidt and Seidenberg actively differentiated from “the public Internet.” Basically, through private contracting, big corporations could deal directly with the Verizons and AT&Ts of the world to create the next YouTube, maybe dangle it without discrimination to the public just long enough for us to be hooked, and then discriminate like hell over it. But don't worry, the FCC will “monitor the development of these services.” Google, a company that I've long admired and currently hold thousands of dollars of stock in, just “went evil.”

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Mitchell Bard: Krugman’s Takedown of Ryan Demonstrates How Conservatives Are at War With the Middle Class

August 8, 2010

Conservatives routinely paint Barack Obama as a socialist looking to redistribute wealth in the United States. (Or worse, as Rep. Bob Inglis (R-S.C.) reported that tea party leaders, during a meeting, espoused paranoid delusions of a totalitarian takeover of the U.S. by Obama.) This charge is cynical and outrageous, not just because it is false and a naked attempt to use fear mongering to drum up votes, but because there is actually a group of Americans actively engaged in wealth redistribution, and they have been for quite some time. Who are these people looking to move massive amounts of assets from one subsection of Americans to another? The conservatives themselves. Beginning with the Reagan administration, and reaching its fullest realization during the presidency of George W. Bush, conservatives have systematically been acting to redistribute wealth from the middle class upward. The result has been the steady decay of the middle class, and it’s all a result of conservative policies, specifically involving taxes and deregulation. Bush successfully pushed through accelerated deregulation and massive tax cuts for the highest earners. The result was that while the wealthiest Americans saw substantial income gains, real income for the middle class was static (and far below the robust growth of the middle class during the Clinton administration). And when, in the absence of regulation, Wall Street’s reckless bets nearly brought ruin to the financial industry, the result was a massive recession that severely hit the lower, working and middle classes. As I lamented last month , middle and working class Americans have every right to be angry now, but that anger shouldn’t be directed at the Democrats in November, but at the Republicans, whose policies created the economic mess the country finds itself in. Which is why I was so happy to see Paul Krugman’s annihilation of the economic plan advanced by the so-called “intellectual” star of the Republican party, Rep. Paul Ryan of Wisconsin. Krugman exposed Ryan’s plan for what it is, a replay of the Bush economic policies, only this time on steroids: A massive tax break for the wealthiest five percent of Americans that would cost the country $4 trillion over the next ten years, a tax increase for the other 95 percent of Americans, and monumental cuts in government spending that would cause catastrophic pain for the lower, working and middle classes (while having little effect on the wealthy, the primary beneficiaries of Ryan’s plan). Oh, and Ryan’s plan would add to the deficit, pushing it far beyond the current projections for 2020. (Of course, Ryan is touting the savings of his spending cuts without accounting for the costs of his tax cuts for the rich.) I thought Krugman’s exposure of the realities of the Ryan plan provided a solid summing up of current Republican ideology. On the surface, Ryan appears more reasonable than the more vocal leaders of his party. He tends to avoid the outrageous pronouncements of his fellow conservatives (think Sarah Palin , Rep. Steve King (R-IA) and his talk of ” velvet revolution ,” Rep. Michelle Bachman (R-MN) and House Minority Leader John Boehner , not to mention the lies and vitriol spouted by pundits like Rush Limbaugh and Glenn Beck, as well as the consistent national security fear-mongering of Newt Gingrich , and the out-and-out insanity on parade daily in the media, like the recent charge by Colorado gubernatorial candidate Dan Maes that his Democratic opponent encouraged bike use as mayor of Denver as part of a plan to convert the city into a “United Nations community,” not to mention the possible Queen of the wackos, Nevada GOP senate candidate Sharron Angle , including her claim that the press should ask the questions she wants to answer .). Ryan is the young, normal-looking and sounding face Republicans would like to send out in front of the public, but, as Krugman comprehensively laid out, his policies are no more mainstream or plausible than those of his more obviously extreme colleagues. No, Ryan, just like the others, is completely dedicated to policies that empower corporations and transfer wealth upward, at the expense of the middle class. In short, Ryan and the rest of the conservatives are at war with lower, working and middle class Americans. The Republicans would like to frame the November midterm elections as a matchup between a socialist party looking to redistribute wealth and engineer a government takeover of the private sector (the Democrats) v. a party defending traditional American values of free market, capitalist economics (the Republicans). Such a framing of the two parties is a Republican fantasy, as accurate as the charge that President Obama was not born in the United States (which, according to a recent CNN poll , nearly two in five Republicans believe to be true ). But one look at the reality of the Bush years and the behavior of Republicans during the Obama administration paints a very different picture. On issue after issue, the Republicans have sided against the middle class, whether it was opposing financial regulation (even after GOP-touted deregulation resulted in the near financial collapse that plunged the country into deep recession), pushing for an extension of the Bush tax cuts for the wealthy, opposing any kind of job-creating stimulus (that didn’t involve more tax cuts for the rich), opposing and delaying the extension of unemployment benefits to those out of work (and painting the unemployed as lazy), opposing state aid that would preserve the jobs of teachers, police officers and firefighters (even though it would decrease the deficit), opposing health care reform (except to protect private insurance companies), and even opposing aid to workers sickened by the toxic fumes at Ground Zero after the 9/11 attacks. The smoking gun of GOP dedication to the wealthy at the expense of the middle class (and the revelation that the party’s supposed fanatical opposition to deficits is a facade) came when one Republican after another lined up to back Sen. John Kyl’s position that it was okay to add to the deficit for tax cuts for high earners (something even conservative stalwart Alan Greenspan could not support ). The GOP record of the last ten years demonstrates that, in reality, the election in November will pose a choice between Democrats who support a free market capitalist economy, but with protections to prevent against its excesses (thus protecting lower, working and middle class Americans), and Republicans at war with the middle class, advocating policies that further their suffering while benefiting Wall Street, corporations and the wealthiest Americans. Conservatives are right when they say that there are those in Washington looking to redistribute wealth. It’s just that it’s their party that is all for the redistributing.

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Mitchell Bard: Krugman’s Takedown of Ryan Demonstrates How Conservatives Are at War With the Middle Class

August 8, 2010

Conservatives routinely paint Barack Obama as a socialist looking to redistribute wealth in the United States. (Or worse, as Rep. Bob Inglis (R-S.C.) reported that tea party leaders, during a meeting, espoused paranoid delusions of a totalitarian takeover of the U.S. by Obama.) This charge is cynical and outrageous, not just because it is false and a naked attempt to use fear mongering to drum up votes, but because there is actually a group of Americans actively engaged in wealth redistribution, and they have been for quite some time. Who are these people looking to move massive amounts of assets from one subsection of Americans to another? The conservatives themselves. Beginning with the Reagan administration, and reaching its fullest realization during the presidency of George W. Bush, conservatives have systematically been acting to redistribute wealth from the middle class upward. The result has been the steady decay of the middle class, and it’s all a result of conservative policies, specifically involving taxes and deregulation. Bush successfully pushed through accelerated deregulation and massive tax cuts for the highest earners. The result was that while the wealthiest Americans saw substantial income gains, real income for the middle class was static (and far below the robust growth of the middle class during the Clinton administration). And when, in the absence of regulation, Wall Street’s reckless bets nearly brought ruin to the financial industry, the result was a massive recession that severely hit the lower, working and middle classes. As I lamented last month , middle and working class Americans have every right to be angry now, but that anger shouldn’t be directed at the Democrats in November, but at the Republicans, whose policies created the economic mess the country finds itself in. Which is why I was so happy to see Paul Krugman’s annihilation of the economic plan advanced by the so-called “intellectual” star of the Republican party, Rep. Paul Ryan of Wisconsin. Krugman exposed Ryan’s plan for what it is, a replay of the Bush economic policies, only this time on steroids: A massive tax break for the wealthiest five percent of Americans that would cost the country $4 trillion over the next ten years, a tax increase for the other 95 percent of Americans, and monumental cuts in government spending that would cause catastrophic pain for the lower, working and middle classes (while having little effect on the wealthy, the primary beneficiaries of Ryan’s plan). Oh, and Ryan’s plan would add to the deficit, pushing it far beyond the current projections for 2020. (Of course, Ryan is touting the savings of his spending cuts without accounting for the costs of his tax cuts for the rich.) I thought Krugman’s exposure of the realities of the Ryan plan provided a solid summing up of current Republican ideology. On the surface, Ryan appears more reasonable than the more vocal leaders of his party. He tends to avoid the outrageous pronouncements of his fellow conservatives (think Sarah Palin , Rep. Steve King (R-IA) and his talk of ” velvet revolution ,” Rep. Michelle Bachman (R-MN) and House Minority Leader John Boehner , not to mention the lies and vitriol spouted by pundits like Rush Limbaugh and Glenn Beck, as well as the consistent national security fear-mongering of Newt Gingrich , and the out-and-out insanity on parade daily in the media, like the recent charge by Colorado gubernatorial candidate Dan Maes that his Democratic opponent encouraged bike use as mayor of Denver as part of a plan to convert the city into a “United Nations community,” not to mention the possible Queen of the wackos, Nevada GOP senate candidate Sharron Angle , including her claim that the press should ask the questions she wants to answer .). Ryan is the young, normal-looking and sounding face Republicans would like to send out in front of the public, but, as Krugman comprehensively laid out, his policies are no more mainstream or plausible than those of his more obviously extreme colleagues. No, Ryan, just like the others, is completely dedicated to policies that empower corporations and transfer wealth upward, at the expense of the middle class. In short, Ryan and the rest of the conservatives are at war with lower, working and middle class Americans. The Republicans would like to frame the November midterm elections as a matchup between a socialist party looking to redistribute wealth and engineer a government takeover of the private sector (the Democrats) v. a party defending traditional American values of free market, capitalist economics (the Republicans). Such a framing of the two parties is a Republican fantasy, as accurate as the charge that President Obama was not born in the United States (which, according to a recent CNN poll , nearly two in five Republicans believe to be true ). But one look at the reality of the Bush years and the behavior of Republicans during the Obama administration paints a very different picture. On issue after issue, the Republicans have sided against the middle class, whether it was opposing financial regulation (even after GOP-touted deregulation resulted in the near financial collapse that plunged the country into deep recession), pushing for an extension of the Bush tax cuts for the wealthy, opposing any kind of job-creating stimulus (that didn’t involve more tax cuts for the rich), opposing and delaying the extension of unemployment benefits to those out of work (and painting the unemployed as lazy), opposing state aid that would preserve the jobs of teachers, police officers and firefighters (even though it would decrease the deficit), opposing health care reform (except to protect private insurance companies), and even opposing aid to workers sickened by the toxic fumes at Ground Zero after the 9/11 attacks. The smoking gun of GOP dedication to the wealthy at the expense of the middle class (and the revelation that the party’s supposed fanatical opposition to deficits is a facade) came when one Republican after another lined up to back Sen. John Kyl’s position that it was okay to add to the deficit for tax cuts for high earners (something even conservative stalwart Alan Greenspan could not support ). The GOP record of the last ten years demonstrates that, in reality, the election in November will pose a choice between Democrats who support a free market capitalist economy, but with protections to prevent against its excesses (thus protecting lower, working and middle class Americans), and Republicans at war with the middle class, advocating policies that further their suffering while benefiting Wall Street, corporations and the wealthiest Americans. Conservatives are right when they say that there are those in Washington looking to redistribute wealth. It’s just that it’s their party that is all for the redistributing.

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Fannie Mae: Home Prices To Decline Into Next Year

August 6, 2010

Home prices will decline into next year, Fannie Mae said Thursday, reversing earlier projections that the housing market would stabilize this year. Former Federal Reserve Chairman Alan Greenspan said Sunday on NBC’s “Meet the Press” that a so-called double-dip recession was possible “if home prices go down.” Fannie’s forecast, disclosed in its latest quarterly report filed with the Securities and Exchange Commission, shows that the government-owned mortgage giant has turned bearish on the housing market. Fannie Mae, the federal mortgage association, along with its sister entity, Freddie Mac, own or guarantee about half of all U.S. mortgages. “We expect that home prices on a national basis will decline slightly in 2010 and into 2011 before stabilizing, and that the peak-to-trough home price decline on a national basis will range between 18 percent and 25 percent,” the bailed-out behemoth said in its filing. Some housing market analysts, notably John Burns, Mark Hanson, and Dean Baker, have been expecting price declines for some time, but a review of Fannie’s recent regulatory filings show that the firm’s expectations at the start of the year were more positive but have grown grim as time has passed. Put another way, Fannie Mae says the housing market is getting worse. In February, the Washington-based firm said in its annual filing that it expected “home prices to stabilize in 2010.” In May, Fannie said it expected home prices “will decline slightly in 2010 before stabilizing.” The firm also forecast in May that it saw the peak-to-trough decline in home prices nationwide to be in the 18-23 percent range. Fannie changed that to 18-25 percent in its latest filing. The company uses its own formula, eschewing the popular S&P/Case-Shiller Home Price Index. “They are basically going with consensus thinking all three times,” John Burns, a housing industry consultant based in Irvine, Calif., said of Fannie’s last three forecasts. Burns also expects home prices to drop. “It’s a good sign they’re getting a little more in touch with reality,” said Dean Baker, co-director of the Washington-based Center for Economic and Policy Research. Baker expects home prices to drop an additional 15 percent, arguing that the housing bubble has yet to fully deflate. He cautions, though, that part of that decline could be the market over-shooting its correction. Baker is one of a few prominent economists that had been warning about the housing bubble during the boom and to have predicted the mortgage meltdown. Mark Hanson, a housing industry analyst based in California, said in an interview last week that he expects home prices to continually decline in each of the next four years. Greenspan, though, said the data “don’t show” a nationwide decline. “Home prices, as best we can judge, have really flattened out in the last year,” he said Sunday. “And while it is true that most economists expect a small dip from here largely as a consequence of the ending of the [temporary homebuyer] tax credit, the data don’t show that at this particular stage. “If home prices stay stable, then I think we will skirt the worst of the housing problem,” the former Fed chairman added. While the Obama administration has talked up the stabilized housing market and the rise in home prices since the beginning of the year, it, too, has begun to note the possibility housing prices will drop. In its annual Economic Report of the President sent to Congress in February, the White House’s Council of Economic Advisers, referring to vacant homes that are intentionally being held off the market — part of the so-called “shadow inventory” — said that the “overhang may lead to some additional price declines, although prices are unlikely to fall at the same rate as they did during the crisis.” On Monday, Alan B. Krueger, the Treasury Department’s assistant secretary for economic policy and its chief economist, also noted that the “large inventory of homes on the market relative to the sales pace, along with a significant number of homes in foreclosure also poses a downside risk to prices,” he said in a statement. In the spring, Krueger spoke of “stabilizing home prices” and said that “housing market futures point to flat housing prices through 2010,” according to a May 3 statement. The Federal Reserve’s main policymaking body has also turned bearish, warning in June about the possibility of declines in home prices. “With the expiration of [temporary tax credits for homebuyers], home sales and starts had stepped down noticeably and could remain weak in the near term,” participants noted during the Federal Open Market Committee’s June 22-23 meeting, according to minutes released last month. “With lower demand and a continuing supply of foreclosed houses coming to market, participants judged that house prices were likely to remain flat or decline somewhat further in the near term.” Borrowers are losing their homes at a record pace. Banks have repossessed about 1.4 million homes since Obama took office, according to data provider RealtyTrac. And foreclosures, though down from their 2009 highs, still average well over 300,000 homes per month. While it takes a record 461 days to complete a foreclosure, an average according to Jacksonville, Fla.-based data provider Lender Processing Services, for the more than 2.8 million homes that were foreclosed on last year that day of reckoning has either passed, or is approaching soon. Fannie said Thursday that it expects its inventory of repossessed homes “to continue to increase significantly throughout 2010.”

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Jerry Chautin: Salvador Dali: Virtuoso Artist or Clever Marketer?

August 5, 2010

“This is a particularly open moment in the art world,” according to a practitioner that is well-connected with New York City’s art galleries. “There’s receptivity to just about everything from dung balls to ephemera,” she told me during a discussion about the difficulty that artists have marketing their creations. “On the downside, there are, in my opinion, too many artists being churned out of the universities and too many would-be photographers.” The corollary is that most of the students lack the marketing training to compete with their peers. That is why colleges and universities are offering marketing classes as part of their art and design curriculum. I told the New York pundit that my wife, Julie, and I have seen his work in several cities and we have also been to the Salvador Dali Museum in St. Petersburg, Fla. We noted that in addition to his talent as an artist, he was a master in marketing himself. More recently, we attended the opening of his late works at the High Museum of Art in Atlanta, Ga. on Aug 1. As a result, I gained more marketing insight to share with my readers and SCORE clients so that they can beef-up their approach to selling artworks and homemade crafts. Although Dali died in 1989 at age 85, his antics and self-promotion are legendary and the High embellishes it online . And as if he were in charge of the opening-night festivities, it was replete with acrobats, jugglers and Daliesque mustaches handed out for the amusement of the elegantly dressed ladies and gentlemen. The 150-item exhibit included the surrealist’s paintings, photographs and videos. Many were as controversial as his marketing machine that some it say detracts from his talent. Dali managed to stay in the press with stories in periodicals and striking photographs, including features in Life magazine; six times in one 12-month period. He appeared on numerous TV shows such as What’s My Line and spontaneously created a shaving-cream drawing for his ostentatious entrance on I’ve Got a Secret . Dali is also remembered for bringing an anteater to the Dick Cavett Show . And as if Harpo Marx needed a more outrageous shtick, Dali gave him a harp with barbed wire strings, tuning knobs made of spoons, and it was wrapped in cellophane as a Christmas present. But what about Dali’s art? I asked the New York pundit if his unrelenting self-promotion was a distraction. “Would I prefer that Matisse be in his studio making art or on the phone or doing mailings to make sales?” she replied. “In pushing artists so firmly into the business model or productivity, we may be fostering artists who turn out products rather than art.” So I asked her if there are ways for artists to find a balance and e-mailed her my April 5 ” Herald-Tribune ” column about getting into galleries as another way to market art. “That’s why it’s so vital that an artist find a gallerist that believes in his or her work and has the marketing skills, financial resources and broad collector and gallery networks to promote it in today’s global environment,” she answered. That allows the artist time to concentrate on the “process of deepening their art by continuing to explore new avenues.” Sales and marketing are learned skills. Inexpensive marketing workshops and free mentoring are offered at SCORE , Small Business Development Centers and Women’s Resource Centers . They are three resource partners of the U.S. Small Business Administration . Jerry Chautin is a volunteer SCORE business counselor, business columnist and SBA’s 2006 national ” Journalist of the Year ” award winner. He is a former entrepreneur, commercial mortgage banker, commercial real estate dealmaker and business lender. You can follow him at www.Twitter.com/JerryChautin

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Tiger Oil Company Memos: Letters From Possibly The Worst Boss Ever

August 5, 2010

Sick of your boss? The next time you’re ready to quit, compare yourself to Edward Mike Davis, the CEO of the failed Houston oil firm Tiger Oil. (Hat tip to Boing Boing .) Gathered by Letters of Note , the memos, all of which were apparently written in the 1970s are masterstrokes in the art of tyrannical leadership. The highlights include: commands to avoid speaking to Edward Mike Davis, to avoid idle conversation and personal calls — and, case you’re wondering, Edward Mike Davis does “not appreciate people coming into my office and helping themselves to my candy, cigars, medicine, and other personal items.” The Houston Press dug up the letters a few years ago, and E&P ran a series of posts in which it heard from a handful of readers who had encountered “Tiger Mike .” Real or not, check out some of the most disturbing of the memos — and check out the full collection at Letters of Note. MEMORANDUM DATE: December 9, 1977 TO: Payroll FROM: Edward Mike Davis SUBJECT: Sick Pay Effective now, employees will be docked for the time they are off sick, unless I authorize you to pay them. This is for Tiger Oil – Houston Office – employees. (Signed) EDWARD MIKE DAVIS And here’s another gem in which Edward Mike Davis instructs his employees to avoid talking to him: MEMORANDUM DATE: January 13, 1978 TO: Landmen, Geologists, Geophysicists, Engineers, or To Whom It May Concern FROM: Edward Mike Davis This memorandum is an addendum and in addition to the “Memorandum To All Monthly Salaried Personnel” dated January 12, 1978. This is for Steve Chamberlain, Bill Durr, Wayne Rogers, on down. When you are on the road or out doing my business, that is exactly what I expect you to do 100%. I do not want any fabricated expense accounts, drinking or carousing around on my money. Telephone calls for business purposes only will be accepted — not personal. This will apply to all geologists, geophysicists, and whoever the hell it may concern who works for me. If you don’t like it, you can do the same thing the ones in the first memo got told — pick up your check! If it doesn’t apply to you, and you have not violated this, you don’t have to worry. If you have violated this, correct it by not doing it any more. All I want to do is run a good orderly ship — or rather than that, run it like the Army. If I don’t pay you enough money to do these things you want to do personally, then I suggest you ask for a raise or quit and get another job. Don’t take advantage of me, because I am going to be looking down your throat. You need the job — I don’t! Do not speak to me when you see me. If I want to to speak to you, I will do so. I want to save my throat. I don’t want to ruin it by saying hello to all of you sons-of-bitches., (Signed) EDWARD MIKE DAVIS

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Henry Blodget: Now AOL’s Tim Armstrong Needs to Address His Credibility Problem

August 5, 2010

Well, AOL blew its quarter again–the second straight quarter out of the box . That’s not good. But CEO Tim Armstrong didn’t help himself (or his company) by the way he delivered the news. The notes we’ve read from the conference call suggest that Tim’s tone was inappropropriately disgruntled for a CEO whose company has just crapped the bed two quarters in a row–especially one that is trying to establish initial credibility with Wall Street. Tim’s tone was also presumably grating to those who, only a few months ago, trusted Tim and his team to–at worst–deliver on the low expectations they had set during the IPO roadshow. Specifically, on the call this morning, Tim does not appear to have said something like “The early months of this turnaround are going considerably worse than we thought, and we take full responsibility for that.” Saying something like that would have given Tim credibility. It would also have been the stand-up thing for a CEO who has just blown it to do. Instead, Tim listed success after success at AOL, said of course the turnaround was taking a long time, chided the press for focusing only on bad news, and then basically upbraided Wall Street for not giving AOL an appropriately high valuation. Well, in case no one at the company has the balls to tell Tim why AOL’s stock is in the tank, we’ll do so: It’s in the tank, in part, because AOL has disappointed investors–and in part because many of those investors are no longer listening to a word Tim says. Investors understand that it’s hard to turn companies around–especially companies as fundamentally challenged as AOL. Investors understand that these turnarounds often take a long time and that you have to break eggs along the way (such as re-organizing the salesforce). Investors understand that CEOs don’t have perfect foresight and will encounter unforeseen challenges. What investors hate, however, is feeling that a CEO does not have a handle on the business or is not being forthright with them. And on these scores, Tim has dug a big hole that he needs to climb out of. On the call, for example, Tim explained why AOL’s search revenue is dropping so precipitously: AOL’s legacy subscriber base is continuing to shrink, and AOL subscribers account for a big percentage of the searches conducted on AOL’s home page. As the subscribers leave, therefore, they take their search queries with them. That’s a challenge that AOL has faced for the past decade, not only in search but in its premium display business. It’s also a challenge that we have written about extensively on this site, most recently in a pre-IPO analysis entitled ” And Here’s What AOL Won’t Be Telling IPO Investors .” As far as we know, Tim did NOT discuss this fundamental problem with AOL investors on the IPO roadshow. The fact that he is invoking it now, as an explanation and an excuse, is therefore understandably annoying. Tim’s obviously very talented, and there’s no question in our minds that there is a core business at AOL that is worth something and can become a growth business again. The question is how small AOL will have to get before all the collapsing and legacy crap surrounding this business is stripped away and only the growth business remains. Based on the company’s performance since the IPO, the answer is, “A lot smaller than Tim thought during the IPO roadshow–and a lot smaller than IPO investors thought.” If Tim wants to restore his credibility, therefore, the first thing he needs to do is figure out how small AOL is going to get before it starts growing again–and when it will hit this low-water mark. Then he needs to cut those estimates by at least 20% (margin of error) and announce them publicly. Then Tim needs to EXCEED those expectations going forward. At this point, it almost doesn’t matter how small the number is–as Tim pointed out, investors aren’t attributing much value to AOL’s businesses growing in the future. What matters is that AOL get all the bad news out of the way and cure itself of the overpromise-and-underdeliver disease that has infected the company since the day the Time Warner merger was announced in January, 2000. 11 years of disappointing people is a long time. And two more quarters of disappointment, from a team that was supposed to finally have the smarts, charm, and horsepower to end the nightmare, is beyond depressing. Yes, there are good things going on at AOL. Yes, there’s a pony in there somewhere. And, yes, Tim and his team probably have the talent to find it. But if Tim doesn’t learn to do a better job of setting expectations, when he finally does get the AOL ship turned around, no one on Wall Street (or at the company) will be listening. See also: Why Facebook Is Now The Best Tech Company To Work For –>

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Toyota Profit Hits $2.2 Billion Despite Recalls

August 4, 2010

TOKYO — Toyota reported a quarterly profit of $2.2 billion, reversing from red ink a year earlier as the world’s top automaker benefited from a global sales recovery that offset lingering doubts about the safety of its cars. The company, which makes the Camry sedan and Prius hybrid, raised its full year earnings forecast Wednesday, and said it now expects to sell 7.38 million vehicles worldwide for the year through March 2011, up from 7.24 million the previous year. Previously it forecast sales of 7.29 million vehicles. The numbers show that Toyota Motor Corp. is on a recovery track from the sales battering it took from the global financial crisis two years ago and the blows to its image from massive recalls that began last October. Toyota acknowledged uncertainties lie ahead, including the surging yen, which erodes the value of overseas earnings, but is expecting sales to expand in Asia, South America, and other emerging markets. Still, Toyota’s car sales remain far lower than the 9 million-plus vehicles it was selling globally while on its way to overtaking General Motors Co. as the world’s No. 1 automaker. At that time, an ambitious Toyota, which had appeared unstoppable as U.S. rivals GM and Chrysler stumbled, had set a goal of reaching global sales of 10 million vehicles within several years. Toyota’s revenue for the April-to-June quarter surged 27 percent to 4.87 trillion yen ($57.3 billion) as car sales jumped in North America, Japan and other parts of Asia including Thailand and Indonesia. The only trouble spot was Europe, where auto sales were lagging partly because of concerns about Greece’s debt crisis, according to Toyota. Its quarterly profit of 190.47 billion yen ($2.2 billion) was achieved despite worries that Toyota’s recalls of popular models would hurt sales. The result was a sharp improvement from a loss of 77.8 billion yen the year before when the global recession crushed car sales. Toyota said cost reductions of 50 billion yen ($588 million) also helped its latest results, offsetting the damage from a stronger yen, estimated at 30 billion yen ($353 million). The car maker raised its profit forecast for the year through March 2011 to 340 billion yen ($4 billion) from 310 billion yen ($3.6 billion), underlining the staying power of the automaker amid fears about quality control. It increased its annual sales revenue forecast to 19.5 trillion yen ($229 billion) from 19.2 trillion yen ($226 billion). Revenue the previous year was 18.95 trillion yen. Toyota had long been lauded for creating a manufacturing system that ensured a consistently high standard of quality. But the automaker has recalled about 10 million vehicles globally since October for various problems including faulty floor mats, sticky gas pedals, braking software glitches and steering malfunctions. Its reputation has also taken a hit from more than 300 lawsuits it faces in the U.S. claiming damages for deaths and injuries suspected of being linked to acceleration problems and from owners claiming the value of their cars has diminished because of alleged defects. North American auto sales have turned around from a 30-year low in 2009, but the recovery could be fragile. Toyota’s U.S. sales in July jumped 20 percent from June because of the generous rebates being offered to appease customers worried about safety recalls. But they were 3.2 percent lower than the same month the previous year, which was before the recall crisis struck. Tsuyoshi Mochimaru, analyst at Mitsubishi UFJ Morgan Stanley Securities Co., said Toyota may lose some market share to rivals because of the recall but many consumers will see them as routine. “For most people, they are just regular recalls,” he said. “Many people will accept them as part of life.” Senior Managing Director Takahiko Ijichi acknowledged it was difficult to assess what effect the recalls had on Toyota’s latest earnings. He said Japanese government-backed incentives for green vehicles like the gasoline-electric Prius hybrid are set to end in September, and that could hurt sales in Japan. He declined to detail plans for North America, including how long rebates will last, merely expressing hopes for more growth. “We will try to regain trust from our customers as quickly as possible and we will continue our effort to improve sales,” said Ijichi. Toyota shares edged down 1.6 percent to 3,090 yen in Tokyo. ___ Associated Press Writer Mari Yamaguchi contributed to this report.

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Danny Schechter: Happy Anniversary As Economic Collapse Turns Three

August 3, 2010

We live in the United States of Amnesia and selective memory. As we debate the breaking news, we easily forget the sequence of events that broke the bank and left us broke. Three years ago, when the idea of an Obama presidency was sill a fantasy in polite company, a non-seismic financial earthquake began to rumble in ways we then could barely anticipate. Buildings didn’t fall as they did in Haiti’s nightmare, only a financial system. And, there are still piles of rubble everywhere here, too. It was August 2007, and I was blogging about the coming economic collapse even as it appeared that our economy had nowhere to go but up. What began with a few ‘incidents:’–the collapse of New Century Financial, the demise of Bear Stearns– turned into a nonstop month-long drama of economic convulsion as fear turned into panic with calls for intervention. Slowly, like an apple being peeled, the truth got more apparent the closer you got to the core. Suddenly, a crisis that many had warned about or feared was beginning to erupt. In August, it exploded, ruining many a Hedge Fund manager’s vacation in the Hamptons. Armies of too clever by half money managers had been making a fortune feeding off the housing bubble with securitization/real estate practices that are now being characterized as “outright fraud” by none other than President Bush’s chairman of the Federal Reserve. Most of their wheeling and dealing flew under the radar of public scrutiny with the press bolstering the rise of the stock market without examining the precarious “infrastructure” under that “STREET.” A week earlier, Credit Suisse predicted a big stock market fall in 6 months because securities were overvalued. The Fed warned of $l00 billion in credit losses. The Guardian reported, “Some analysts said they feared a broader credit crunch if a collapse in confidence in the US mortgage market rippled out to other parts of the debt markets.” A New York Post article suggested that over two trillion dollars was at risk. Of course, all of this was offered as speculative. Now we know, all of these estimates understated the calamity, often by a factor of ten. I went to a dinner party early in August and met a financial executive who worked at one of Wall Street’s top investment firms. He acknowledged to me that the people shoveling out those sub prime loans knew many of the borrowers couldn’t afford to pay back. They knew what misery they’d cause, but that didn’t stop them. I asked: “So, what happened to due diligence?” one of the “market disciplines” that these bankers are always preaching? He shrugged, indicating that there was so much to be made that normal safeguards and standards were pushed to the side or forgotten. He says there were many internal investigations underway then. I thought, how can we allow them to investigate themselves? And then it happened, in August, the dog days of summer, when, as if in accord with the law of gravity, what had gone up started coming down. AP reported: “NEW YORK (AP) — Wall Street suffered one of its worst losses of 2007 Thursday, leading a global stock market plunge as investors succumbed to months of worry about the mortgage and corporate lending markets.” On August 9th, President Bush met the press to reassure us all was well on the Wall Street front. He was asked about market “volatility” which is how the meltdown was then described. He prattled on, arguing, “the fundamentals of our economy are strong. I mentioned some of them before. Job creation is strong. Real after-tax wages are on the rise. Inflation is low. Interestingly enough, the global economy is strong, which has enabled us to gain more exports, which helped the second quarter growth numbers to be robust, at 3.4 percent. Another factor one has got to look at is the amount of liquidity in the system. In other words, is there enough liquidity to enable markets to be able to correct? And I am told there is enough liquidity in the system to enable markets to correct.” Note, he repeated what he “was told.” And then he told us. Few believed it. While these message points rolled off the “decider’s” teleprompter, a trader was commenting on his meandering press conference on the financial website Ml-Implode in real time: “He’s being hit with a lot of questions on mortgages, credit crisis, and the economy … and of course the economy is ‘in for a soft landing’, he’s been assured by the treasury that ‘there is plenty of liquidity,’ yadda-yadda-yadda. “But he is stumbling over his words more then usual, not making eye contact, not finishing his sentences … and when he wanders a bit, he quickly goes back on script. It is very odd to watch, to say the least.” Historian Carolyn Baker was one of the few bloggers I read arguing that such double talk was all too common and that we all must become more engaged with these issues. She also noticed that few in the left-liberal end of the political spectrum had a firm grasp on economic issues “which I suspect comes from a fundamental polarization between activism and financial intelligence.” Baker began stressing “the role of fraud, theft, and malicious intent in the American and global financial train wreck which has been exacerbating.” We would see that word “train wreck” more in the weeks to come. This account is from my book PLUNDER: Investigating Our Economic Catastrophe (Cosimo Books). It couldn’t have been more timely but it was largely ignored. It came out a week before Lehman Brothers collapsed at a time when some media outlets were forecasting an upswing. I went on to investigate the pervasive criminal activities that led to the collapse for a new film and companion book. Three years later, while this issue has been touched on, it is still largely ignored in most of our media with few bankers and financial manipulators being prosecuted for the shady deals that sank the economy. The consensus among those involved is the collapse was the result of a series of “mistakes.” And yet, the Wall Street Journal just reported that “Gangsters, drug dealers and money launderers appear to be playing their part in helping shore up the financial stability of the euro zone.” How? By using high denominated notes. Admits the chief economist at Citigroup, these high-value bills are “making the euro the currency of choice for underground and black economies, and for all those who value anonymity in their financial transactions and investments.” How blatant is this? How pervasive? Few today want to go back to that summer, just three years ago, when the financial spill began with a gusher of anxiety that led to the bailouts that so many hate now but supported then. Fortune Magazine wrote at the time, “Wall Street loves to talk about letting financial markets weed out the weak. But when the Street itself gets in trouble, it sticks out its little tin cup, asking for help. And gets it.” At the time, a reader wrote prophetically to the Wall Street Journal , criticizing its tendency “to emphasize the positive,” warning: “Things will get worse before they get better…This is a house of cards that our leaders are trying to segment. It isn’t a sub prime problem, it isn’t a foreclosure problem, it isn’t a mortgage problem, a bond= market problem, a hedge fund problem, or a bank problem…This is a= full systematic collapse of our economy… The problems are masked and hidden throughout every layer of our economy…being too slow to react will only compound this problem as it builds momentum …We have no idea how bad this is really going to get.” Three years later, we still don’t. The recovery has not recovered. All is “stalled” to use the phrase du-jour. The growth curve is flat. Long-term joblessness stalks the land and rising as are bankruptcies while foreclosures multiply. College debt is off the charts. Consumer confidence is down while the trade deficit is up. (President Obama is desperately boosting sales of US weapons overseas.) The housing outlook is miserable. Fed-hed Ben Bernanke is moving from rational explanations to talking about “economic mysteries.” Sounds mystical. The Financial Times says “drivel” is spreading in the world of finance. In some ways the financial crisis is like the BP oil spill. Suddenly all the oil has disappeared–thanks to the abuse of dispersants. Wrote a friend, “Same goes for the financial debacle. Now are being told ‘everything’s fine,’ as the authorities have thrown trillions at the problem to shore up our insolvent banking system. But it’s still all toxic below the surface, under a thin veneer of normalcy.” There has still not been a real hard-hitting public investigation of the forces behind this meltdown like the one led by the Pecora Commission during the New Deal. What we have had is more like an academic inquiry than a Watergate-style set of hearings. The media largely narrows the issues and looks away distracting us with games of celebrity sensation and partisan ping-pong. The public remains angry, but in Paul Krugman’s word, “unfocused.” Three years later, in an August like that one, I feel like I am still raving and ranting about the crimes of Wall Street in films, blogs, commentaries and books with few paying attention and even fewer organizing to stop it. Why is that? Perhaps, it’s time to give up. I guess many still believe that if we close our eyes, it will all go away. Dream on. I wonder if that phrase “the silence of the lambs” was prophetic? News Dissector Danny Schechter made Plunder The Crime of Our Time, now available on DVD with a companion book. Comments to dissector@mediachannel.org

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Candy Spelling: Have I Learned To Twitter for Nothing?

July 28, 2010

I’ve never been sure how to conjugate the verb, but do know that I tweet, I can twit, I do twitter, I have twitted, sometimes I twittled while signing in to Twitter and I will twitomorrow. On second thought, I think I’ve twitched while twitting, too. Wait, that brings up the more-complicated question if Twitter is even a verb. Isn’t it a person, place or thing, making it a noun? All these brain-twisting exercises might be for nothing. I saw a story on thewrap.com that was headlined, ” Annenberg Study: 0% Would Pay for Twitter .” I know Wallis Annenberg (and knew her father, Walter, and stepmother, Lenore), and my money was on the fact that none of them had Twittered or tweeted or twit, especially since Twitter came about long after Walter and Lenore would have noticed, let alone asked 1,981 people if they’d pay for it. It turned out that the Twitter question about paying was just the icing on the cake of a survey by the USC Annenberg School for Communication about America’s digital future. The bottom line was that more people are Internet reliant, but that there was “strong negative reaction to paying for online services.” Forty-nine percent of those surveyed said they used free micro-blogs such as Twitter. And, yes, zero percent said they would be willing to pay for Twitter. My first thought was to dump my Twitter stock, and then I realized they still haven’t found a way to generate enough revenue to take the company public. Ooops, I thought, Facebook is free, too. Wait. They don’t issue stock either. Those guys probably knew what the Annenberg School is reporting. Jeff Bezos at amazon.com went the other way. At least his business sold something; but, still, from 1995 to 2002, he confidently assured the press and the shareholders that it was all right not to make a profit. I did buy that stock and stuck with him for a long time. Thanks, Jeff. People will pay for books and DVDs and portable readers. Will people pay for something they’ve received for free? Will they choose a paid service or product or program when there are so many free ones available? Doesn’t this sound like the broadcast TV versus cable argument and the satellite radio discussion? The entire Annenberg study was fascinating, touching on all kinds of subjects about what we believe, where we go and what matters online. Yet, I still can’t believe that not one Twitter user would pay for it. What would happen to all the hours people spend on Twitter if it became a pay service? What if each of them contributed an hour a week to public service? How about if they helped Betty White with whatever charity she’s helping these days. (We know she’s not Tweeting.) Start charging, Twitter. Maybe you can re-shape society to have people cook meals for others rather than just telling everyone what they ate for lunch. And, yes, in the interest of full disclosure, I do Tweet, Twit and Twitter. I’d probably pay, too, just to stay in the club.

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SEC Looking Into Possible BP Securities Violations

July 28, 2010

WASHINGTON — BP says the Securities and Exchange Commission and the Justice Department are conducting informal inquiries into securities matters arising from the Gulf oil spill. BP disclosed the probe Tuesday in a filing with the SEC, marking the latest development in the evolving government investigations following the April 20 explosion and fire on the BP-operated drilling rig Deepwater Horizon that touched off the environmental disaster. The oil company’s disclosure came at the end of a written summary of events that have taken place since June 1, when the Justice Department announced it is conducting criminal and civil investigations. In its latest filing, the company said it is possible the Justice Department will seek to charge BP with violations of U.S. civil or criminal laws. BP’s filing at the SEC added that other federal agencies, including the Environmental Protection Agency, are expected to seek penalties under the Clean Water Act and other laws. Citizens groups have sued or have issued notices of intent to do so under the Clean Water Act and other environmental laws, the BP filing said, and other agencies, including the U.S. Chemical Safety and Hazard Investigation Board, may begin or already have begun probes. Separately, The Washington Post reported that a law enforcement official said criminal investigators will look for evidence that inspectors from the Minerals Management Service were bribed or promised industry jobs in exchange for lenient treatment. Melissa Schwartz, a spokeswoman for the former MMS, which is now called the Bureau of Ocean Energy Management, Regulation and Enforcement, declined to comment. A spokeswoman in the office of U.S. Attorney Jim Letten in New Orleans declined to comment Tuesday night. ___ Associated Press writer Michael Kunzelman in New Orleans contributed to this report.

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Target Homophobia? CEO Gregg Steinhafel Defends $150K Donation To Anti-Gay Politician, LGBT Community Angered

July 27, 2010

A campaign contribution to a well-known anti-gay politician in Minnesota has become a rather large public relations nightmare for Target CEO Gregg Steinhafel–and the store now faces boycotts and backlash from the gay community. Target’s Chief Executive Steinhafel said gay employees have been concerned about the money helping state Rep. Tom Emmer , who opposes gay marriage. Target gave $150,000 to MN Forward, a group staffed by former insiders from outgoing Republican Gov. Tim Pawlenty’s administration. MN Forward is running TV ads supporting Emmer. The Associated Press reports that Emmer is a fiery conservative who lauds Arizona’s strict approach to illegal immigration, once advocated chemical castration for sex offenders and wants to lower taxes. His profile contrasts with Target’s moderate image in Minnesota, where the company is known for donating to public school programs, food pantries and the annual Twin Cities Gay Pride Festival. Following the money trail, the Minnesota Independent has also linked Emmer to a Minnesota Christian “punk-rock ministry” that supports the killing of gays and lesbians. Learning that Target would lend financial support to someone like Emmer angered many LGBT shoppers and gay rights supporters. The Human Rights Campaign, which previously gave Target a 100 percent approval rating for their treatment of LGBT employees, issued this statement Monday: “Target has worked hard to create a fair and equitable workplace for its LGBT employees, and should be proud of its leadership in this area. It is for this reason that HRC is very disappointed in Target’s significant monetary contribution to Minnesota Forward, a group supporting the most clearly anti-LGBT candidate for Governor in Minnesota. We have reached out to Target to express our concern over this contribution. While political contributions to support candidates are not a factor in HRC Foundation’s Corporate Equality Index, HRC finds it puzzling that Target would take great steps to support LGBT inclusiveness while simultaneously helping a candidate who shamelessly rejects equality for LGBT Minnesotans.” In an email to Target staff, Steinhafel responded to the criticism. “We rarely endorse all advocated positions of the organizations or candidates we support, and we do not have a political or social agenda,” Steinhafel wrote. “As you know, Target has a history of supporting organizations and candidates, on both sides of the aisle, who seek to advance policies aligned with our business objectives, such as job creation and economic growth…Let me be very clear, Target’s support of the GLBT community is unwavering, and inclusiveness remains a core value of our company.” (Read Steinhafel’s full response here .) Meanwhile, some gay rights advocates are considering a boycott of Target over the ordeal. In Chicago, openly-gay state Rep. Greg Harris, who celebrated a Target opening in his district last week, told ChicagoPride.com he hopes Target will rethink their support of Emmer. “Companies like Target need to understand that they can’t have it both ways when it comes to issues of our basic rights, and that the facts will eventually come out. I hope that they will rethink this contribution and find a way to make it right,” Harris said. A Facebook group dedicated to boycotting Target has also gained momentum. Money from Target’s top executives has gone mainly to Republicans. Former Chief Executive Officer Robert Ulrich, who retired last year, gave $617,000 during his time as Target’s leader, most of it to the state GOP. Current Chief Executive Gregg Steinhafel has donated about $25,000, almost exclusively to Republican candidates and causes, including at least $1,000 to Michele Bachmann’s “Victory Committee.” Check out more of Steinhafel’s campaign contributions here .

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Richard (RJ) Eskow: Elizabeth Warren and Her Discontents

July 26, 2010

Somebody really, really doesn’t want Elizabeth Warren to run the new Consumer Protection Financial Bureau, or “CFPB,” which she first envisioned and proposed. Who? The big banks, for sure, as well as others who don’t want their misbehavior brought to light. And Tim Geithner, whose vision of Wall Street and its problems is fundamentally different from Warren’s. There are others, too — ideologues like Megan McArdle of the Atlantic , who has made something of a cottage industry out of attacking Warren on specious grounds. The President’s attempting to split the baby when it comes to appointing Ms. Warren, but the facts and public perception are aligned and present him with a stark reality: He must choose between appointing Ms. Warren or placating the big banks. There is no Third Way. Unfortunately for the President, Elizabeth Warren is a yes or no question. The ideological opposition to Warren’s appointment is usually grounded in the false notion that the relationship between, say, a bank and a lender, is a symmetrical exchange between equals taking place in a mythical “free market.” They’ve failed to heed the lesson taught by Freud in Civilization and its Discontents : “Civilization … obtains mastery over the individual’s dangerous desire for aggression by weakening and disarming it and by setting up an agency within him to watch over it, like a garrison in a conquered city.” An agency outside the individual is necessary to a well-functioning civilization, too, especially when confronting an oligopolistic banking system with a history of fraud and predation. There have been at least two empty and ineffective lines of attack against Elizabeth Warren: The first is that she’s opposed to “financial innovation,” and the second is that she lacks the necessary “managerial experience.” Ms. McArdle attempts to open a third: That Prof. Warren is a bad scholar. McArdle fails miserably, misquoting or misunderstanding other academic papers and Warren’s own work while failing some basic analytical challenges. She does succeed, however, in showing the lengths to which some will go to block this appointment. Despite the fact that McArdle is ” the business and economics editor for The Atlantic ,” numbers don’t seem to be her thing. She infamously miscalculated the effect of repealing Bush’s tax cuts for each American by a factor of 10 , arriving at $25 instead of $250 per person, and then blithely explained: “The calculator on my computer won’t go into the billions, and I truncated incorrectly. The main point stands; even a very optimistic set of assumptions doesn’t yield huge net benefit.” Actually, $250 for every man, woman, and child in the US — and that’s only for the next two years — is serious money. And as for that calculator problem, Ms. McArdle, there’s only one word for that: spreadsheets. You’ve heard of them, I trust. Spreadsheets are particularly handy when you’re making statements like this: “Does it matter if we have a regulator that can use data consistently? ” In this piece McArdle leans on an old Wall Street Journal anti-tax screed by Todd Wysocki. “More weird metrics for Elizabeth Warren,” her headline quavers. McArdle eagerly repeats Wysocki’s suggestion that family living expenses are actually less than they were in the 1970s. But Wysocki’s stacking the deck (and making a completely different point) by using pre-tax rather than after-tax figures. Warren’s point is that two-earner families have less disposable income today than one-earner families did in the seventies, even with both adults working. She’s right. I used a spreadsheet (highly recommended) to look at the increases in expenses, using the figures Wysocki (and the McArdle) cites. Here’s what I found: Mortgage costs increased from 18% to nearly 20% of after-tax income. Health insurance premiums increased from 3.5% to 3.63%. (That doesn’t include increases in out of pocket expenses like copays and deductibles.) And there was a whopping new expense of nearly 20% for day care, which wasn’t needed with a one-earner family. Add in car payments and the expenses Wysocki cites went from 39% of after-tax income to 62.3% — which pretty effectively underscores Prof. Warren’s point, don’t you think? McArdle saves her real “firepower,” such as it is, for a piece she calls ” Considering Elizabeth Warren, the Scholar .” It’s a blend of deception, misdirection, and poor analysis, chock full of comments like this one about Warren’s book on two-earner families: “… Warren simply fails to grapple with what her thesis suggests … Admittedly, I don’t quite know what to say, but at least I can acknowledge that it’s a pretty powerful problem for the current family model. Warren kind of waves her hands and mumbles about social programs and more supportive work environments. There is no possible solution outside of a more left-wing government.” Got it? McArdle says Warren’s book is a failure because a) Warren fails to solve one of the problems she identifies, b) not that McArdle knows what the answer is, but c) “Warren kind of waves her hands” (get me a rewrite!) and “d) mumbles about social programs etc.” — which means she does propose solutions, but they’re ones that involve e) “more left-wing government.” Which McArdle doesn’t think is the solution, even though she acknowledges that she doesn’t have a solution. Does it matter if we have a “business and economics editor” who can use data … and logic … consistently? McArdle then suggests that Warren doesn’t understand numbers because Warren asserts that (says McArdle) “housing consumption hasn’t increased much … by less than a room per house.” McArdle conclues that this is a “twenty percent” increase, given a starting size of five rooms per house, although if consumption’s gone up by less than a room per house it’s less than twenty percent per house (no calculator needed for that one!) And that’s with two people working full-time instead of one. “The square footage of new homes has increased dramatically since 1960,” writes McArdle. But how much of that is McMansions and other high-end homes? She doesn’t say, presumably because she doesn’t know. Since we’re talking about housing consumption among middle- and lower-income working families, a basic understanding of “mean,” “median,” and “average” would make that kind of information critical to McArdle’s argument. But McArdle’s main line of attack is on the papers that Warren has co-authored on medical bankruptcy. Yet at times she’s not criticizing the paper itself, but what Warren’s co-authors may or may not have told the press. As for the article itself, it’s entitled “Illness And Injury As Contributors To Bankruptcy,” and comes replete with appropriate cautions like these: ” We cannot presume that eliminating the medical antecedents of bankruptcy would have prevented all of the filings we classified as ‘medical bankruptcies.’” Yet McArdle repeatedly claims Warren et al. suggested medical bills were the sole cause of these bankruptcies, then beating this nonexistent claim to death. McArdle also makes the analyst’s most basic mistake — fallacy based on anecdote — by repeatedly saying that by definition “Patty Barreiro” is a “medical bankruptcy” case. Barreiro is the wife of Edmund Andrews, the financial writer who wrote about their own bankruptcy. She’s become a bete noir for all of those who believe that bankruptcy is most commonly a character defect, not an unfortunate combination of circumstances. McArdle’s fixation on her isn’t just bizarre. It’s also bad analysis. The definition Warren et al. use for “medical bankruptcy” is $5,000 or 10% of income, and those are appropriately high figures for anyone familiar with the real world. (McArdle also grossly mis-states the contents of another academic paper, but fortunately this piece does the heavy lifting on that misrepresentation – hat tip Atrios .) For those who argue that Warren lacks managerial experience, I have three words: “Chief Administrative Officer.” Warren understands the mission better than anyone, and she’ll be able to hire someone to handle the logistics. And, as for her alleged hostility to “financial innovation,” there’s no sign of that. Some “financial innovations” destroyed the economy, and she’s right to be a little “hostile” to them. Elizabeth Warren’s view of what needs to be done to fix Wall Street is fundamentally different from Tim Geithner’s or Larry Summers’. Her view is correct — and it’s also more popular politically. The President’s attempt at a “nuanced” solution — that Elizabeth Warren will ” play a role ” even if she’s not appointed to lead CFPB – is a nonstarter. The banks, and the public, would see that decision for what it is: A surrender to financial interests at the expense of the American consumer. The Megan McArdles of this world will wail and gnash their teeth If Elizabeth Warren is appointed, but that doesn’t matter. What does matter is that if Warren doesn’t run CFPB, the same regulators who mismanaged the economy in general – and consumer protection in particular – will still have the upper hand. Any answer but “yes” to the Warren question would be a disaster, both on its merits and politically. You don’t need a spreadsheet to figure that out. _______________________________________________________________ Richard (RJ) Eskow, a consultant and writer (and former insurance/finance executive), is a Senior Fellow with the Campaign for America’s Future. This post was produced as part of the Curbing Wall Street project. Richard also blogs at A Night Light . He can be reached at “rjeskow@ourfuture.org.” Website: Eskow and Associates

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EU Bank Stress Tests: 7 Banks Fail

July 23, 2010

LONDON — All but 7 of 91 European banks passed the much-anticipated “stress tests” aimed at showing Europe’s banking system is sound enough to weather the continent’s debt crisis – an outcome that officials hoped would forestall further market turmoil. It had been thought that some banks needed to fail for the exercise to be accepted as credible, and some analysts still argued that the results showed the tests weren’t rigorous enough – the euro was trading flat on the day after the release of the results at just below $1.29. If financial markets take the view that the tests were not tough enough when European trading resumes Monday, then the exercise could make matters worse – and further expose the EU to charges that it has failed to rise to the debt crisis within its borders. “The stress tests do not seem that stressful and it is looking more like a political whitewash rather than a genuine attempt to reassure financial markets that eurozone banks have balance sheets that could really withstand sovereign risk shocks,” said Neil MacKinnon, global macro strategist at VTB Capital. “They are delaying the day of reckoning,” said MacKinnon. Policymakers in Europe hope the results will reassure markets worried about hidden bank losses from the crisis. They were quick to laud the results as a resounding vote of confidence in Europe’s banking system. The European Union said the results “confirm the overall resilience” of the continent’s banking system. Christine Lagarde, France’s finance minister, said the tests were “tough” and “very comprehensive and as a result I would suggest that those results should be very credible and should raise the confidence in European banks.” The Committee of European Banking Supervisors, the little-known regulator charged with conducting the stress tests, said the seven banks would see their capital positions fall too low for them to weather a steep fall in the price of government bonds many of them hold. This worst-case scenario dubbed “sovereign shock” still stopped short of an outright debt default by an EU government and has made the tests less convincing to some, since many analysts still predict Greece will eventually have to restructure its debt – a polite word for default, under which creditors are paid over a longer period of time. The bank examiners said government default was precluded by an EU rescue fund to backstop countries in financial difficulty. Germany’s already-nationalized lender Hypo Real Estate Holding AG failed the strength test, but that had been widely expected. So far, the bank, which does not expect to return to profit before 2012, has received capital injections worth euro7.7 billion ($10 billion) from the German government’s bank rescue fund and loan guarantees of more than euro100 billion. There had been speculation in the run-up to the publication of the results that some of Germany’s regional banks – the landesbanken – would fail to clear any stringent hurdles. As it was, only NordLB came close to joining Hypo but barely scraped by. As expected, Spain notched up the most casualties, with five of its small savings banks – the so-called cajas – deemed as having insufficient capital to deal with future adverse shocks following the collapse of the country’s property boom. The five Spanish banks – none of them listed on stock markets – were Diada, Unnim, Espiga, Banca Civica, and Cajasur, which was bailed out by the Bank of Spain in May. Greece’s ATE bank failed and confirmed it would go ahead and proceed with a capital increase, which will involve the highly indebted Greek government itself, the main shareholder. In total the seven banks have to raise euro3.5 billion to shore up their finances, CEBS said. That’s far lower than some analysts had been predicting. But the supervisors said Europe’s banks have, over the past couple of years, gone a long way to shoring up their balance sheets. Mansoor Mohi-uddin, managing director of foreign exchange strategy at UBS, is unconvinced by the whole process, contrasting it with the United States, where similar tests last year resulted in ten of the 19 banks being tested requiring to raise $75 billion. “After economists, journalists, credit rating agencies and officials spend the weekend analyzing the results, the currency markets are likely to react negatively on Monday,” said Mohi-uddin. Anxiety about Europe’s banks mounted in tandem with the government debt crisis, which eventually led to euro110 billion ($142 billion) international bailout of Greece and a $1 trillion backstop for other troubled governments if they need it. The worry was the banks were holding government bonds from the likes of Greece, especially as their finances had already been battered by the recession. Banks became more reluctant to lend to each other and many of Europe’s banks became more dependent on emergency funds from the European Central Bank for much of their day to day needs. ____ Associated Press Writers Juergen Baetz in Berlin, Greg Keller in Paris, Elena Becatoros and Derek Gatopoulos in Athens, Barry Hatton in Lisbon, and Ciaran Giles in Madrid contributed to this story.

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EU Bank Stress Tests: 7 Banks Fail

July 23, 2010

LONDON — All but 7 of 91 European banks passed the much-anticipated “stress tests” aimed at showing Europe’s banking system is sound enough to weather the continent’s debt crisis – an outcome that officials hoped would forestall further market turmoil. It had been thought that some banks needed to fail for the exercise to be accepted as credible, and some analysts still argued that the results showed the tests weren’t rigorous enough – the euro was trading flat on the day after the release of the results at just below $1.29. If financial markets take the view that the tests were not tough enough when European trading resumes Monday, then the exercise could make matters worse – and further expose the EU to charges that it has failed to rise to the debt crisis within its borders. “The stress tests do not seem that stressful and it is looking more like a political whitewash rather than a genuine attempt to reassure financial markets that eurozone banks have balance sheets that could really withstand sovereign risk shocks,” said Neil MacKinnon, global macro strategist at VTB Capital. “They are delaying the day of reckoning,” said MacKinnon. Policymakers in Europe hope the results will reassure markets worried about hidden bank losses from the crisis. They were quick to laud the results as a resounding vote of confidence in Europe’s banking system. The European Union said the results “confirm the overall resilience” of the continent’s banking system. Christine Lagarde, France’s finance minister, said the tests were “tough” and “very comprehensive and as a result I would suggest that those results should be very credible and should raise the confidence in European banks.” The Committee of European Banking Supervisors, the little-known regulator charged with conducting the stress tests, said the seven banks would see their capital positions fall too low for them to weather a steep fall in the price of government bonds many of them hold. This worst-case scenario dubbed “sovereign shock” still stopped short of an outright debt default by an EU government and has made the tests less convincing to some, since many analysts still predict Greece will eventually have to restructure its debt – a polite word for default, under which creditors are paid over a longer period of time. The bank examiners said government default was precluded by an EU rescue fund to backstop countries in financial difficulty. Germany’s already-nationalized lender Hypo Real Estate Holding AG failed the strength test, but that had been widely expected. So far, the bank, which does not expect to return to profit before 2012, has received capital injections worth euro7.7 billion ($10 billion) from the German government’s bank rescue fund and loan guarantees of more than euro100 billion. There had been speculation in the run-up to the publication of the results that some of Germany’s regional banks – the landesbanken – would fail to clear any stringent hurdles. As it was, only NordLB came close to joining Hypo but barely scraped by. As expected, Spain notched up the most casualties, with five of its small savings banks – the so-called cajas – deemed as having insufficient capital to deal with future adverse shocks following the collapse of the country’s property boom. The five Spanish banks – none of them listed on stock markets – were Diada, Unnim, Espiga, Banca Civica, and Cajasur, which was bailed out by the Bank of Spain in May. Greece’s ATE bank failed and confirmed it would go ahead and proceed with a capital increase, which will involve the highly indebted Greek government itself, the main shareholder. In total the seven banks have to raise euro3.5 billion to shore up their finances, CEBS said. That’s far lower than some analysts had been predicting. But the supervisors said Europe’s banks have, over the past couple of years, gone a long way to shoring up their balance sheets. Mansoor Mohi-uddin, managing director of foreign exchange strategy at UBS, is unconvinced by the whole process, contrasting it with the United States, where similar tests last year resulted in ten of the 19 banks being tested requiring to raise $75 billion. “After economists, journalists, credit rating agencies and officials spend the weekend analyzing the results, the currency markets are likely to react negatively on Monday,” said Mohi-uddin. Anxiety about Europe’s banks mounted in tandem with the government debt crisis, which eventually led to euro110 billion ($142 billion) international bailout of Greece and a $1 trillion backstop for other troubled governments if they need it. The worry was the banks were holding government bonds from the likes of Greece, especially as their finances had already been battered by the recession. Banks became more reluctant to lend to each other and many of Europe’s banks became more dependent on emergency funds from the European Central Bank for much of their day to day needs. ____ Associated Press Writers Juergen Baetz in Berlin, Greg Keller in Paris, Elena Becatoros and Derek Gatopoulos in Athens, Barry Hatton in Lisbon, and Ciaran Giles in Madrid contributed to this story.

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Unemployment Benefits Bill Approved By House, 272-152

July 22, 2010

WASHINGTON — Federal checks could begin flowing again as early as next week to millions of jobless people who lost up to seven weeks of unemployment benefits in a congressional standoff. President Barack Obama on Thursday signed into law a restoration of benefits for people who have been out of work for six months or more. Congress approved the measure earlier in the day. The move ended an interruption that cut off payments averaging about $300 a week to 2 1/2 million people who have been unable to find work in the aftermath of the nation’s long and deep recession. At stake are up to 73 weeks of federally financed benefits for people who have exhausted their 26 weeks of state jobless benefits. About half of the approximately 5 million people in the program have had their benefits cut off since its authorization expired June 2. They are eligible for lump-sum retroactive payments that are typically delivered directly to their bank accounts or credited to state-issued debit cards. Many states have encouraged beneficiaries to keep updating their paperwork in hopes of speeding payments once the program was restored. In states like Pennsylvania and New York, the back payments should go out next week, officials said. In others, like Nevada and North Carolina, it may take a few weeks for all of those eligible to receive benefits. The 272-152 House vote Thursday will send the measure to the White House, where Press Secretary Robert Gibbs said Obama would sign it as soon as it arrived. The House vote came less than 24 hours after a mostly party-line Senate vote Wednesday on the measure, which is just one piece of a larger Democratic jobs agenda that has otherwise mostly collapsed after months of battles with Republicans. “Americans who are working day and night to get back on their feet and support their families in these tough economic times deserve more than obstruction and partisan game-playing,” Obama said Wednesday night. The measure is what remains of a Democratic effort launched in February to renew elements of last year’s economic stimulus bill. But GOP opposition forced Democrats to drop $24 billion to help state governments avoid layoffs and higher taxes, as well as a package of expired tax cuts and a health insurance subsidy for the unemployed. Wrangling over the larger measure consumed about four months. The jobless benefits portion picked up enough GOP support in the Senate – Maine moderates Susan Collins and Olympia Snowe – only after it was broken off as a stand-alone bill. It would have passed last month were it not for the death of Robert Byrd, D-W.Va.; Byrd’s replacement, Democrat Carte Goodwin, cast the key 60th vote Tuesday to defeat a GOP filibuster. Most Republicans opposed the measure because it would add $34 billion to a national debt that has hit $13 trillion, arguing that it should have been paid for with cuts to other programs, such as unspent money from last year’s economic stimulus bill, which is earning mixed grades at best from voters as unemployment stands at 9.5 percent nationwide. Thirty-one House Republicans, about one in six, voted for the measure Thursday, while 10 Democrats opposed it. “The other side says that these unemployment benefits stretching to almost two years are needed and must be added to the $13 trillion debt, even as they claim their trillion-dollar stimulus plan has been a success at creating millions of jobs,” said Rep. Charles Boustany, R-La. “It makes you wonder if they’re looking at the same jobs data as the rest of us.” Opposition marked a change of heart for many Republicans who had voted for deficit-financed unemployment benefits in the past, including twice during George W. Bush’s administration. Earlier this year, Republicans twice allowed temporary unemployment measures to pass without asking for a roll call vote. Opinion polls show that deficits and debt are of increasing concern to voters, especially Republicans’ core conservative supporters and the tea party activists whose support the GOP is courting in hopes of retaking control of Congress. Republicans winced in February when Sen. Jim Bunning, R-Ky., blocked a temporary benefits measure for several days, only to relent amid a wave of bad publicity. But just a few weeks later, all but a handful of Republicans were opposed to renewing benefits unless they were paid for with cuts elsewhere in the $3.7 trillion federal budget. Democrats countered that many economists say unemployment benefits boost the economy since most beneficiaries spend them immediately. But any such effects are likely to be modest when measured against a $14.6 trillion economy. “Unemployment benefits protect those who have lost their jobs through no fault of their own but would lead to more jobs, higher wages and a stronger economy for all Americans,” said Speaker Nancy Pelosi, D-Calif. “The money will be spent immediately on necessity, injecting demand into the economy, creating jobs.” The program is being renewed through the end of November. The White House signaled earlier this week that another extension may be sought if the jobless rate remains high, as many expect.

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Unemployment Extension In Spotlight As Obama Blasts GOP Filibuster Of Jobless Aid

July 19, 2010

President Obama used his bully pulpit Monday to blast Republicans for holding up a bill to reauthorize extended unemployment benefits, one day before the Senate will try once again to restore aid to the 2.5 million long-term jobless Americans who have missed checks since May. “A majority of Senators have tried not once, not twice, but three times to extend emergency relief on a temporary basis,” Obama said from the Rose Garden, surrounded by a handful of individuals whose unemployment insurance had run out because of senatorial dithering. “Each time a partisan minority in the Senate has used parliamentary maneuvers to block a vote denying millions of people who are out of work much ended relief. These leaders in the Senate who are advancing a misguided notion that emergency relief somehow discourages people from finding a job should talk to these folks. That attitude, I think, reflects a lack of faith in the American people.” Senate Republicans, with an assist from Nebraska Democrat Ben Nelson, have insisted that the $33 billion cost of reauthorizing the extended benefits not add to the federal budget deficit and have offered alternative bills to pay for the benefits by slashing spending elsewhere. “Democrats have refused over and over again to extend additional unemployment insurance in a way that won’t add to an already unsustainable national debt,” said Don Stewart, a spokesman for Sen. Mitch McConnell (R-Ky.), the Republican leader in the Senate. “Everyone agrees on extending the additional unemployment insurance, but the Democrat way is to insist we add it to the national debt at the same time–while blocking Republican efforts to pass the same extension without the debt. Remember, this is the same crowd that said if we just borrowed a trillion dollars for the stimulus bill, the unemployment rate would be down to 7.5 percent by now.” As Obama and congressional Democrats have been eager to point out, Republicans do not apply the same fiscal discipline when it comes to the Bush administration’s soon-to-expire tax cuts for the wealthy. Letting the tax cuts expire would save $678 billion over ten years, according to the Office of Management and Budget. “After years of championing policies that turned a record surplus into a massive deficit, the same people who didn’t have any problem spending hundreds of billions of dollars on tax breaks for the wealthiest Americans are now saying we shouldn’t offer relief to middle class Americans like Jim, or Leslie, or Denise, who really do need help,” Obama said, referring to three people who joined him in the Rose Garden. A top Senate Republican aide questioned Obama’s timing, since Senate Democrats expect to succeed in breaking the GOP filibuster on Tuesday, thanks to the newly-appointed replacement for the late Sen. Robert Byrd (W.Va.). “What the hell?” the aide asked. “They’re going to get that vote tomorrow at 2:30 now that they will have a new Dem Senator. It’s already scheduled. It’s like the President is going to call for the sun to rise in the east.” The administration’s defenders argued that it was both helpful and productive to have the president draw a contrast between the two parties on this issue. The White House actually saw an entry to engage more aggressively in the debate last week, when Sen. Jon Kyl (R-Ariz.), the second-ranking Republican in the Senate, argued that tax cuts for the wealthy should be passed without offsetting the costs, while UI had to be paid for in full. Aides in the White House’s communications shop immediately jumped on the exchange and emailed it to reporters, distilling it to a simple narrative: “For unemployed, you have to pay. For millionaires you don’t.” By week’s end, Press Secretary Robert Gibbs had mentioned Kyl’s remarks several times, while President Obama himself highlighted the contrast during his weekly radio address. Monday’s speech was supposed put a crest to the campaign, with aides on the Hill acknowledging that the president was deliberately injecting political heat into the discussion. “It’s all about making [Republicans] pay a price,” said a top Senate Democratic aide. Reflecting the politics that have metastasized around the unemployment insurance debate, on Monday morning Florida Senate candidate Marco Rubio scoffed at the idea that an extension would serve as a form of economic stimulus. “I don’t think anyone can say that with a straight face,” said the Tea Party candidate, who also echoed Kyl’s points about paying for unemployment benefits but not tax cuts for the rich. Actually, many serious, straight-faced people have argued for the stimulative effect of jobless aid. The Congressional Budget Office estimated that for every dollar the government spent on aid to the unemployed, the economy would see output rise by between $0.70 to $1.90 — the biggest bang for buck of any government stimulus policy. Reducing income taxes in 2011 (Rubio’s preferred solution) would result in $0.10 to $0.40 in economic output per dollar spent. “[R]educing payroll taxes for firms that increase payroll or increasing aid to the unemployed,” the CBO reported, “would have the largest effects on output and employment per dollar of budgetary cost in 2010 and 2011.” Mark Zandi, the chief economist at Moody’s Analytics and an adviser to Sen. John McCain (R-Ariz.) during the 2008 campaign, said the same thing: “No form of the fiscal stimulus has proved more effective during the past two years than emergency UI benefits,” he said. Several Republicans — and even some Democrats — have suggested that the extended unemployment benefits, which in some states gave the unemployed 99 weeks of benefits, make the jobless lazy. Obama attacked those arguments on Monday. “The Americans I hear from in letters and meet in town halls — Americans like the ones here today — they aren’t looking for a handout,” the president said. “It’s not that they don’t want to work. They desperately do. They just can’t find a job. They’re honest, decent, hardworking folks who’ve fallen on hard times through no fault of their own; who have nowhere else to turn except unemployment benefits; who need emergency relief to help them weather this economic storm.”

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Charles Gasparino: Lloyd Blankfein’s Days Are Numbered as Chairman of Goldman Sachs

July 16, 2010

It’s a testament to the odd world in which we live that when a Wall Street firm pays a $550 million fine by conceding negligence in how it dealt with clients, its stock surges, adding billions of dollars in market value for the firm’s shareholders. But that’s what’s happening to Goldman Sachs, as it reached its long awaited settlement with the Securities and Exchange Commission over how it sold a basket of mortgage related debt to investors in 2007. Back when the SEC brought the case, the conventional wisdom on Wall Street and the financial media was that Goldman didn’t have to settle — the case was weak and Goldman is, after all, Goldman. As I wrote on these page back then, Goldman would have to settle because: (a) the SEC dug up some real questionable activity; and (b) no Wall Street firm, not even one with the ties to government that Goldman possesses can go to war with its primary regulator. Now that Goldman has indeed settled, the news is being spun, again mostly by the financial media, that the deal with the SEC was a victory for Goldman’s CEO Lloyd Blankfein, who survived the investigation largely unscathed, paying a measly $550 million to the government (equivalent to a few days trading gains at Goldman) and without having to give up any power, such as relinquishing his role as chairman of the board, as senior executives both inside Goldman and at competing firms believed would be part of any settlement. Well, if history is any guide, Blankfein may not go tomorrow, or even next month, but sometime in 2011, Blankfein will at the very least no longer be chairman of Goldman, and may also be forced out of the firm altogether. If you don’t believe me ask former Citigroup CEO Sandy Weill. Like Blankfein, Weill (at least on paper) was a good CEO from an operational standpoint. Following the creation of Citigroup in 1998, shares of the big bank soared. The bank was what’s known as a Wall Street darling for its strong earnings and a surging stock price, and Weill was regarded as the King of Wall Street, having engineered the largest financial deal ever when he merged his company, the Travelers Group brokerage, insurance and investment banking empire, with commercial banking powerhouse Citicorp. At the height of his power, Weill suddenly popped up on the radar screen of New York Attorney General Eliot Spitzer. Before Spitzer got involved with hookers and became a TV host, he was the sheriff of Wall Street, looking to right wrongs from the last great scandal, the internet bubble where firms sold worthless dotcom and tech stocks to unsuspecting investors. Emails he uncovered showed that Weill at least did something stupid, if not fraudulent: He pressured an analyst, Jack Grubman, to inflate his stock rating on telecom giant AT&T, which was an investment banking client (Weill also sat on AT&T’s board, while AT&T CEO Michael Armstrong sat on Citi’s board) Grubman wrote in an email that as a favor for upgrading the stock, Weill got his kids in an exclusive pre-school. The scandal, was described by the Wall Street Journal , as a “kid pro quo.” Weill continued to deny wrongdoing and was never charged. Citigroup, however, was charged with fraud and ended up paying a $400 fine to settle the matter, but Weill appeared to have retained his control of the bank. The initial reaction in the press and among his peers in the financial business was that Weill had won, by having the bank pay a relatively small fine, and his status as CEO and the King of Wall Street secure. Not quite. A few months later, Citigroup announced that Weill was stepping down as CEO, handing that job to Chuck Prince, who basically negotiated the settlement package. Citigroup maintained that the two moves were unrelated. But people in Spitzer’s office told me they really weren’t: While negotiating the settlement, Citigroup’s board made it clear to investigators that Weill’s days were numbered at the top of the firm that he founded. Spitzer was merely affording Weill a graceful exit in an effort to end the case. Full disclosure: I have no knowledge that Goldman’s board has tacitly agreed to pull a Weill on Blankfein and has plans for him to step aside, but the circumstances involving the two men are so remarkably similar. While Blankfein wasn’t directly involved in the questionable trade that landed Goldman in trouble, he is responsible for remaking Goldman into predatory trading culture that has caught the attention of regulators, Congressional committees (recall Sen. Carl Levin badgering Goldman traders for selling “shitty” investments to their clients) and hurt Goldman’s once stellar reputation, as Weill’s actions hurt Citigroup’s. Some would say that’s where the comparisons end; Citigroup deals with the general public that buys stocks through its brokerage unit (Smith Barney) and makes deposits in its branch banking offices. Goldman deals with large sophisticated investors who couldn’t care less how Darwinian the company behaves. That used to be true, but no more. Goldman’s image has been battered, not as bad as say a company like BP, but not far behind. And image does count these days given the scrutiny and oversight placed on Wall Street and the banks following the financial collapse-induced bailouts. Now that financial reform has been passed, Goldman will have to cut back on some of that aggressive trading that powered its earnings and was Blankfein’s forte. That means it will have to devote more and more resources to developing its client business and relationships, convincing blue chip companies that it is the right firm to handle delicate negotiations involving mergers, acquisitions, and other corporate financing assignments. More and more, these clients do care about image (ask yourself why has so many top companies embraced the useless but politically correct “green agenda”). In fact some have already jettisoned Goldman as scrutiny of the firm grew over the past year. Who is the right guy to change Goldman’s image to fit the new paradigm it faces? It’s not Lloyd Blankfein and that’s why he won’t survive.

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36 Arrested In Massive $251 Million Medicare Scam

July 16, 2010

MIAMI — Federal authorities said Friday they are conducting the largest Medicare fraud bust ever in five different states and arrested dozens of suspects accused in scams totaling $251 million. Several doctors and nurses were among those arrested in Miami, New York City, Detroit, Houston and Baton Rouge, La., accused of billing Medicare for unnecessary equipment, physical therapy and HIV treatments that patients typically never received. Ninety-four suspects were indicted, and authorities said 36 people had been arrested as of Friday morning. More than 360 agents participated in Friday’s raids, announced by Attorney General Eric Holder and Health and Human Services Secretary Kathleen Sebelius at a health care fraud prevention summit in Miami. Officials said they chose Miami because it is ground zero for Medicare fraud. Authorities indicted 33 suspects in the Miami area, accused of charging Medicare for about $140 million in various scams. “With today’s arrests we’re putting would-be criminals on notice: health care fraud is no longer a safe bet,” Holder said Friday. Cleaning up an estimated $60 billion to $90 billion a year in Medicare fraud will be key to paying for President Barack Obama’s proposed health care overhaul. Federal officials have promised more money and manpower to fight fraud, setting up strike forces in several cities. Around the country, the schemes have morphed from the typical medical equipment scam in which clinic owners billed Medicare dozens of times for the same wheelchair, while never giving the medical equipment to patients. Now, officials say, the schemes involve a sophisticated network of doctors, clinic owners, patients and patient recruiters. Violent criminals and mobsters are also tapping into the scams, seeing Medicare fraud as more lucrative than dealing drugs and having less severe criminal penalties, officials said. For instance, agents bugged a medical center in Brooklyn, N.Y., where eight people are charged with running a $72 million scam that submitted bogus claims for physical therapy for elderly Russian immigrants. Clinic owners paid patients, including undercover agents, in exchange for using their Medicare numbers and a bonus fee for recruiting new patients. Recording devices captured hundreds of kickback payments in a private room where a man sat at a table and did nothing but pay patients all day, authorities said. The so-called “kickback” room had a poster on the wall resembling Soviet-era propaganda, showing a woman with a finger to her lips and two messages in Russian: “Don’t Gossip” and “Be on the lookout: In these days, the walls talk.” With the surveillance, the walls “had ears and they had eyes,” U.S. Attorney Loretta Lynch said at a news conference in Brooklyn. In a separate Brooklyn case, authorities indicted six patients who shopped their Medicare numbers to various clinics. More than 3,744 claims were submitted on behalf of one woman in the past six years. The patients did not receive the services billed to Medicare, authorities said. “Today’s arrests illustrate how health care fraud schemes can replicate virally and migrate rapidly across communities,” said Daniel R. Levinson, inspector general of the U.S. Department of Health and Human Services, which oversees Medicare. Federal authorities launched a strike force in Miami in 2007 to target the problem. The program has since expanded to seven cities and is responsible for more than 720 indictments that collectively have billed the Medicare program for more than $1.6 billion. Miami-Dade County received about $520 million from Medicare in home health care payments intended for the sickest patients in 2008, which is more than the rest of the country combined, according to a federal report. Only 2 percent of the patients live here. It used to take 90 days before the government detected a scam. By then, the crooks were long gone, sometimes with millions of dollars. Now authorities get billing data as it’s submitted, allowing them to catch suspects in real time, “as opposed to the typical pay and chase model we’ve had for years,” said Gerald Roy, assistant inspector general for investigations. __ Associated Press Writer Tom Hays in New York contributed to this report.

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Halsey Minor: Why I Fight

July 15, 2010

CHARLOTTESVILLE, Va. — Here in the shadow of Monticello, I often wonder what Thomas Jefferson would think of today’s America, a nation that is rapidly but silently abandoning the individual in favor of faceless corporations, rapacious banks and a collusive, unresponsive government. The Founding Father who envisioned a republic built on the unalienable rights of “life, liberty and the pursuit of happiness” would be sickened at how the very institutions built to protect average citizens from repression have instead become weapons of the rich, the powerful, and mostly the corporate. Whole branches of government have become enablers and enforcers for the corporations and banks that created the economic crisis out of greed and irresponsibility and now are exploiting the mess they themselves created to tighten their grip on America. Big bailouts of Merrill Lynch, Bank of America and AIG get the press attention. Far more corrosive are thousands of unpublicized, self-dealing transactions overseen by bureaucrats following laws written by a pliant Congress and enforced by lifetime-tenured judges trained to believe in the bank over the debtor. A prime example of how the common good is subverted can literally be seen from the gardens of Monticello. Prior to the financial crisis, I was building a hotel in my hometown of Charlottesville. As its own balance sheet faltered, Silverton Bank, the Atlanta-based institution funding the project reneged on its commitment to finance and simply cut off funding. I sued the bank; the bank sued me. Within two months, Silverton was taken over by the Federal Deposit Insurance Corp. in the largest bank failure in Georgia history. I am sure you would expect that the FDIC’s priority would be to maximize the value of the asset for the public by working with me to wrap up the problem caused by the failed bank. We could have put more than 100 people back to work, injected millions of dollars into the Charlottesville economy and finished a half-built structure that now stands as a nine-story testament to hard times. Instead, Chairman Sheila Bair’s FDIC did nothing of the sort. The FDIC accused me of defaulting on the loan, but unlike the actions banks usually take in a default, they did not foreclose. I thought that was extremely odd — until I learned that the loan had been split up among eight banks and as long as there was no foreclosure the banks could say the loans were “good.” In other words, the banks can say the loan is good even though the project is a see-through concrete-and-steel skeleton that has sat idle for more than a year. How fitting, then, that the person overseeing my project for the FDIC is Claire Cotter, a former employee at Ameriquest, which established a fund to settle accusations that it had engaged in unlawful mortgage lending practices during the real estate boom. When Cotter’s bank went belly up, she joined the FDIC knowing the ropes. She immediately went to work to protect the balance sheets of the eight lending banks by wasting millions of taxpayer dollars continuing to fight Silverton’s misguided legal battle, all so these banks don’t have write down my loan. (I’ve already won arbitration against the bank’s developer on the project; I face the FDIC in October.) Between the government and me, roughly $10 million already has been spent in legal fees on a dispute over a $10.3 million loan. Ridiculous, I know; so why do I fight? The simple answer is that someone must or we will emerge from this recession with wealth and power concentrated in a few tiny financial institutions representing a new ruling elite, not unlike the one that inspired Jefferson’s generation to revolution. The same day I heard Bank of America pledge to pay back its taxpayer-funded loan from the government my babysitter told me the interest rate on her Bank of America credit card doubled — from 14% to 28%. When the FDIC carves up the assets of failed banks, it cuts incredible deals with other financial institutions — offering loans for pennies on the dollar and even guaranteeing future losses. So banks bailed out because they were too big to fail get bigger as they swallow the portfolios of those smaller banks the government decides are expendable. And they are aided in this bulking up by the so-called regulators, who can clear pesky obstacles (formerly known as bank customers and clients) by just legally dismissing their claims or offering up threats of litigation funded by a bottomless federal purse. Countless projects like mine, with countless jobs attached, feeding countless people are considered collateral damage, if they are considered at all. Every time I called Claire Cotter, the FDIC official overseeing my project’s failed lender, to discuss a solution she told me to talk to her lawyer and hung up the phone on me. Litigation is expensive and very few people have the money necessary to fight a bank, let alone the federal government. That’s what they count on. Forget the notion of equal access to justice. A minor dispute can easily cost half a million dollars to try, not counting appeals which big companies and the government always take. Even then, it’s the individual who bears all of the personal risk: lose, and the court can seize possessions; win, and face the prospect of a draining appeal. That’s why small businesses have watched helplessly as their credit lines are unilaterally slashed or capriciously revoked, leaving them without the flexibility they need to hire or expand or order fresh inventory. Most can do almost nothing beyond cycling through the push-button responses on the customer service line and hope that things change. The first step toward that change is for people to know what their government is doing with their money in their name. When people hear terms like FDIC “financial protection,” they should understand that it doesn’t necessarily refer to their financial protection but to the banks that hold their mortgage or their credit card. All that FDIC sign in the bank means is that if the banks really screw it up, you and I will pay ourselves back. FDR would be appalled by the FDIC, created in 1933 and designed to help people. Americans are rightly suspicious of moneymen, and not just in the last few years. Jefferson himself once said “that banking institutions are more dangerous to our liberties than standing armies.” When it exists to support businesses and create jobs and fund innovation, finance is integral to a modern economy. But when finance becomes an end in itself and morphs from tool to master, it’s easy to imagine Jefferson’s fear realized in a system that deprives “the people of all property until their children wake up homeless on the continent their fathers conquered.”

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Ayo Adeyeye: PolitiFact’s Truth-O-Meter in Need of Tune-Up

July 8, 2010

Last month, Arianna Huffington, HuffPost Editor-in-Chief, appeared on ABC’s This Week on a panel with Liz Cheney, a former Bush Administration official. In an exchange over the BP oil disaster in the Gulf, Huffington accused Halliburton, the behemoth oil company who’s one-time CEO was Ms. Cheney’s father and former Vice President, Dick Cheney, of “defraud[ing] the American taxpayer hundreds of millions of dollars.” In characteristically caustic Liz Cheney style, Cheney objected to the charge by questioning Huffington’s citizenship as a resident of Planet Earth. PolitiFact, a fact-checking website and project of the St. Petersburg Times whose site proclaims a mission to “help you find the truth in politics” joined the debate and labeled Huffington’s claim ” Half True ” on its six-pronged “Truth-O-Meter,” denoting that “the statement is accurate but leaves out important details or takes things out of context.” While PolitiFact concedes that all evidence suggests that Halliburton wasted hundreds of millions of taxpayer dollars, whether the waste amounts to fraud “is still being examined,” they report. Let’s see if we can’t speed up that examination. In November 2003, just less than one year after the start of the War in Iraq, Newsweek ran an article entitled ” The $87 Billion Money Pit ,” reporting numerous allegations of “overspending, favoritism and corruption” against Halliburton and other US contractors engaging in Iraq reconstruction. In the article, Halliburton was accused of gouging prices on imported fuel to the tune of $300 million. Citing the Newsweek piece in her opening statement at a Senate Democratic Policy Committee (DPC) hearing that same month, then-Senator Hillary Clinton (D-NY) touted the need for transparency and greater oversight in Iraq reconstruction contracting, saying “we need to assure the American people that their money is being spent wisely, assure the Iraqi people that it is being spent in their interest and assure the world that it is not being spent for profiteering by American companies.” Since the start of the Iraq War, the DPC, a Senate Leadership Committee established by law in 1947 concurrently with a Republican Policy Committee, has held more than two dozen oversight hearings on waste, fraud, and abuse in Iraq reconstruction contracting. Halliburton and its subsidiary Kellog, Brown and Root (KBR) have been the subject of many of them. Chaired by Senator Byron Dorgan (D-ND), these hearings have “unearthed numerous examples of contracting abuse, including the inappropriate awarding of major contracts to Halliburton; billions of dollars in unsubstantiated costs and overcharges on everything from fuel, to meals for the troops, to hand towels; and the delivery of unsafe water to our troops in Iraq, with which the troops showered and brushed their teeth,” Dorgan said in a statement back in 2008. Throughout its investigations into Halliburton, the Committee also uncovered efforts by the Pentagon and the Bush Administration to protect Halliburton from close scrutiny and criticism of its dubious practices including, but not limited to, retaliation against whistleblowers. Charles Smith, the senior civilian overseeing a multi-billion dollar contract awarded to KBR by the Pentagon, was forced out of his job when he refused to approve payment to KBR of more than $1 billion in questionable spending for which Army auditors had determined KBR lacked credible data or records. Bunnatine Greenhouse, once the most senior civilian contracting official at the Army Corps of Engineers, was removed from her job after raising concerns over the award of a $7 billion sole source, no compete, cost plus contract to KBR to restore Iraq’s oil production. Greenhouse testified at a 2007 DPC hearing that the award of the contract to KBR represented the worst abuse she had witnessed in her 23-year career. Still unsatisfied? Halliburton’s transgressions continue. In April 2007, the Pentagon misled Congress about multiple allegations that KBR was providing contaminated water to US troops which, according to KBR’s own internal reports, could have caused “mass sickness or death.” Interestingly, the General whose testimony at a Senate Armed Services Committee hearing misled Members was the same official who ordered the removal of Charles Smith from his post after he objected to KBR’s questionable $1 billion paycheck. In March of 2008, then-Senator Barack Obama (D-IL), along with Senator John Kerry (D-MA) introduced a bill aimed at preventing government contractors like KBR from setting up shell companies in foreign jurisdictions to avoid payroll taxes. Then-Rep. Rahm Emanuel (D-IL) and Rep. Brad Ellsworth (D-IN) introduced companion legislation in the House. In a press release, Obama said, “This legislation would close a tax loophole that has been exploited by Kellogg Brown & Root (KBR), a former subsidiary of Halliburton Corp. This loophole allowed KBR and potentially other government contractors to set up shell companies in the Cayman Islands in order to avoid paying payroll taxes for their American employees.” In his press release, Senator Kerry said “KBR is abusing the public trust at the taxpayer’s expense, and our reform will close the loophole that enables big corporations to take advantage of the American people.” According to Kerry’s office, the loophole that the legislation was intended to close enabled KBR to fleece American taxpayers by nearly $100 million a year. The Fair Share Act of 2008, which was co-sponsored by then-Senator Hillary Clinton was not reported out of the Senate Finance Committee. Arguably, the most reckless example of KBR’s abuse was the subject of a May 2009 DPC hearing, where Senators heard testimony and received internal Pentagon documents showing that in 2007 and 2008, KBR received multi-million dollar bonuses for work that led to the electrocution deaths of US soldiers. In 2008, a Staff Sergeant was electrocuted to death while showering at a US military installation in Baghdad. The Committee obtained testimony based on internal KBR inspection records that KBR had been aware of the electrocution hazard and claimed to fix the problem, meanwhile hiring unqualified third-country electricians and permitting the shocks to persist. Despite the harm done to our troops, KBR was awarded its $83.4 million bonus for the shoddy electrical work done in Iraq in 2007, more than half of which came after the Defense Contract Management Agency warned about ongoing problems with the electrical work. KBR’s infamously reckless conduct throughout the reconstruction process in Iraq is egregious and fundamentally undermines the US mission there. Each time Congress appropriates funds toward war efforts, the government solicits a commitment from the American taxpayer. The American people deserve to have their commitment met with responsible stewardship. Similarly, if it is to live up to its mission statement, PolitiFact has a responsibility to its readers to unambiguously separate fact from fiction and avoid the pitfall of equivocation in the face of controversy by misguided attempts at reaching some artificial middle ground. At this point, it is plain that KBR’s practices have traversed the realm of the wasteful, waded beyond that of the fraudulent, and are now comfortably into the abyss of the outright criminal, so unless PolitiFact’s Truth-O-Meter takes into account understatement, its rating of Huffington’s charge as “Half True” is unjustified and places it squarely on a long and unsavory list of characters who have deferred to KBR in the face of persistent and well-documented abuse.

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Peter Crawfurd: Why Customization Could End Amazon

July 6, 2010

For many years e-tailers have been relying on the Amazon-style model of online commerce, whereby a ready-made, in-stock item is shipped to the customer upon purchase. While other methods – like groupon.com, which allows customers to get together and buy products at a lower price – have come along and become successful, few have really challenged the basic Amazon concept. Over the past two years, online shopping and consumer habits have been evolving. Many shoppers now want products they can say no one else has, and they want them at an affordable price. While online stores can offer lower prices by avoiding certain overhead fees and other expenses, traditional e-commerce sites lack the personal touch today’s customers are craving. In response to this demand, a slew of new start-up companies have rushed to carve out a niche in the expanding market for customized products. With the help of some clever web development, customers now have a never-before-seen level of creative control over the products they purchase. The Start Ups Among Amazon’s extensive clothing range are a great number of mass produced and uninspired dress shirts. ShirtsMyWay.com is one of the clothing companies which have filled the personalization void by allowing shoppers the chance to design their own custom made shirts ; including choice of collar, fabrics, buttons, buttonhole color, monograms and a host of other options. Customers can also input their measurements to ensure a great fit. This model solves two problems shoppers face when buying clothing: the fit and lack of flexibility when it comes to the design and style. ShirtsMyWay.com offers shoppers complete customization at a price well below many off-the-rack brand name dress shirts sold through online retailers. ShirtsMyWay.com has so far sold mens shirts to over 30 countries and has garnered worldwide attention from the press. Another interesting company, focused on food, is Chocomize.com . This site allows customers to design and purchase their own personal milk, white or dark chocolate bars by mixing and matching dozens of ingredients – like chocolate chips, bacon, nuts, sesame seeds, coconut flakes and cinnamon to name just a few. Chocomize.com has received attention from O! – The Oprah Magazine as well as numerous newspapers and food-oriented websites. So far, the same degree of customization has yet to make its way to Nestle’s Kit Kat or Hershey’s Almond Joy. The Giants Of course, some of the world’s largest brands have also embraced customization to branch out to a wider market. This is especially true in the world of footwear. Several years ago, Nike launched Nike ID, their own online store that allows customers to design their own sneakers in minute detail. Other giants like Puma and Adidas followed suit into the realm of customized products. Another company, Zazzle.com , managed to make it big through customization. Of all the companies and websites offering customized products, this one perhaps comes closest to Amazon in terms of the range of products it offers – everything from clothes, mugs, hats, postage stamps, stationary and calendars. Already Zazzle.com has managed to rack up more than 50 million dollars in capital and now visited by nearly 3 million unique visitors every month. When so much is happening in the online customization space, it’s surprising Amazon has not taken a more aggressive stance to this angle of e-tailing (although they have attempted to make one acquisition of a some what customization focused start up). Soon the day may come when the giant e-tailers of the world may need to stop resting on their low-priced/ready-made laurels and respond to ever growing demands for unique, one of a kind goods. If they don’t, they may be loosing out on a big part of the online retailer market and weakening their position as the main player.

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David Isenberg: KBR Gives Uncle Sam the One Finger Salute

July 3, 2010

Le’s take a brief look at the world of rent a generals. Specifically, Lt. Gen. Sanchez. (USA-Ret.). Gen. Sanchez had a distinguished Army career and honorably served his country. He was the highest-ranking Hispanic in the United States Army when he retired on November 1, 2006. Those who can remember past yesterday will recall that he served as the V Corps commander of coalition forces in Iraq from June 2003 to June 2004. While his time as commander was not without controversies ( hostile relations with Paul Bremer, torture scandal at Abu Ghraib, development of the Iraq insurgency) I assume he did the best he could. For most retired officers that would have been enough. But evidently not for Gen. Sanchez. Evidently he felt the need to continue the fight; only now against U.S. civilians and injured veterans. In February it was reported that the U.S. Army wass trying to stop him from continuing to be an expert for KBR in a lawsuit against it over civilian truck driver deaths and injuries. Sanchez is being paid $650 an hour and has reviewed documents and written a report that support’s KBR’s contention it should not be held legally responsible for the deaths of six civilian truck drivers and the injuries of others in a 2004 ambush in Iraq. The suing drivers and family members contend that KBR should have stopped the convoys when it was warned that attacks would increase on April 9, 2004, the first anniversary of the day allies in the U.S.-led invasion of Iraq reached Baghdad. KBR argues that the military approved sending the convoys out and several laws protect KBR from responsibility in a wartime situation. The Army contracts with KBR to provide transportation, food services and other logistical support. In his report for KBR on the 2004 ambush, Sanchez writes that KBR leadership was getting “emotional, hyperbolic, CNN-filtered, open source information, not intelligence” that was warning that the convoys could be ambushed. Sanchez says no battlefield leader could have known the convoy would be attacked. KBR leadership did stop convoys the day after six civilians were killed and 14 injured in the truck convoy ambush. But KBR is also fighting law suits regarding the burn pits it operated in Iraq as I have written about here and here . To see KBR’s last update to the allegations click here . KBR apparently thinks Gen. Sanchez has useful advice to offer here, even though I don’t recall the general having expertise in chemistry or toxicology. Nevertheless KBR, to emulate Paddy” Chayefsky’s famed movie Network, is mad as hell and is not going to take it anymore. The evidence is contained in Exhibit 40, filed back on Feb. 23. I have put the most pertinet parts in boldface. It is important to remember that KBR is in this position now because of the conduct of the United States. First, as the Army’s own AR 15-6 Report clearly admits, but for the Army’s failures in its own processes and procedures on April 9, 2004, the attack, injuries, and deaths associated with the Fisher case would never even have occurred. Second, but for the United States’ refusal to support KBR’s effort in the Fifth Circuit Court of Appeals to uphold the District Court’s 2006 total dismissal of the lawsuits passed on the Political Question Doctrine, there is every reason to believe the Fifth Circuit would have sustained the dismissal. Instead, KBR (and indeed the United States itself in any future Political Question Doctrine dispute) is saddled with a very troublesome Fifth Circuit standard.’ Accordingly, KBR must be able to present the live trial expert testimony of Lieutenant General Sanchez, and to do so in precisely the form and content in which his report was submitted to the Court. This need was exacerbated by Judge Miller’s blatant disregard of the four military declarations submitted in his denial of KBR’s Political Question Doctrine motion, making the General’s live trial testimony possibly the only evidence that will sway Judge Miller. Further, his testimony, including his statement reiterating the AR 15-6 Report’s admission of Army fault, will provide precisely the type of evidence needed to prove on appeal that these cases should have been dismissed on the basis of the Political Question Doctrine – that is, among other things, the failure to do so caused Army officers to present public criticism of each other at trial! As we made clear in our original December 4, 2009 request, as a result of his senior military leadership position in Iraq during the relevant time period, Lieutenant General Sanchez has unique relevant expertise that is not available from any other source. As reflected in his report, the General will testify from that expertise about the circumstances in Iraq in April 2004, the Army’s prosecution of the war, KBR’s logistics support mission, and the actual events up to and on April 8 and 9, 2004 upon which these lawsuits are based. This expert testimony is crucial to KBR’s ability to defend itself on key issues such as state of mind, causation, and various affirmative defenses. Lastly, as you know, throughout the five years of these lawsuits, KBR has carefully refrained from pointing its finger at the United States as the culpable entity. One result of KBR’s restraint in this regard has been that plaintiffs in these cases have gained a huge advantage in the public airing of these lawsuits. Plaintiffs have co-opted the Houston media and other press into presenting only the damning evidence plaintiffs allege prove that KBR intended to injure and kill its own employees for profit. As trial looms, KBR can no longer sit silent, and instead intends to aggressively make its case to the public, hopefully to prevent the entire jury pool from being ‘ We also urge the United States to support KBR in the litigation of these defenses in any appeal that KBR files in these cases. prejudiced against the company. Towards this end, KBR intends to release Lieutenant General Sanchez’s expert report and deposition testimony to the press as part of this campaign. KBR greatly appreciates the support the Army has provided the company in these (and other) lawsuits. But given the untenable posture of the cases and enormous exposure faced by KBR, we cannot overstate the need for the Army to approve this request for reconsideration, We trust that you will give this matter your full, serious, and immediate attention. For those who remember Mario Puzo, KBR seems to be channeling the GodFather, and is making a Army thinly veiled offer it can’t refuse. It will be interesting to see who blinks.

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Toyota Recall 2010: Beleaguered To Recall 270,00 Cars Globally

July 2, 2010

TOKYO — Toyota Motor Corp. will recall 270,000 Lexus and other vehicles worldwide to fix faulty engines in the latest quality lapse at the world’s No. 1 automaker. Flaws in valve springs, a crucial engine component, could make the vehicle stall while it’s moving, Toyota spokesman Hideaki Homma said Friday in announcing the recall. Lexus General Manager Mark Templin said contaminated materials had been used for valve springs during manufacturing. Toyota has received about 200 complaints over faulty engines in Japan but no accidents were reported there or abroad, Homma said. Some drivers told Toyota that engines made a strange noise. The global recall that starts Monday affects seven luxury Lexus sedan models as well as the popular Crown, Toyota spokesman Paul Nolasco said. Of the 270,000 recalled cars, some 180,000 were sold overseas, including the United States, and 90,000 in Japan. The automaker was already scrambling to repair its reputation after 8.5 million vehicles were recalled beginning in October because of problems with sticking accelerator pedals and other issues. Toyota was slapped with a record $16.4 million fine in the United States for acting too slowly to recall vehicles with defects. Japan’s major daily Asahi said Friday the latest recall of 270,000 vehicles could cost Toyota around 20 billion yen ($227 million). Toyota could not confirm the report, which gave no sources. Toyota will inform Japan’s transport ministry of a recall of 90,000 vehicles on Monday. Nolasco said it was unclear how many vehicles would be recalled in the United States, and Toyota will take action for overseas markets as soon as next week. Lexus said Thursday about 137,000 vehicles could be affected by the engine problem in the U.S. Ryoichi Saito, an auto analyst from Mizuho Investors Securities Co. Ltd., said the latest recall was unlikely to hurt Toyota. “It is clear that Toyota has learned a lesson from the recall disaster. The company has acted very swiftly to deal with problems,” Saito said. Toyota dealers have repaired millions of vehicles following the massive global recalls, but the automaker still faces more than 200 lawsuits tied to accidents, the lower resale value of Toyota vehicles, and the drop in the company’s stock. Toyota said last week it will recall 17,000 Lexus luxury hybrids after testing showed that fuel can spill during a rear-end crash. U.S. regulators were working with scientists from NASA to investigate what caused some of Toyota’s vehicles to suddenly accelerate. That review is expected to be completed by late August. Officials were also investigating whether Toyota waited nearly a year in 2005 to recall trucks and SUVs in the U.S. with defective steering rods, a case that could lead to additional fines. ___ Associated Press writer Ken Thomas in Washington contributed to this report.

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